1400 Toastmaster Drive
Elgin, Illinois 60120
www.middleby.com
www.middlebyresidential.com
www.middprocessing.com
2023
A N N U A L R E P O R T
T H I S
I S M I D D L E B Y
2023 FINANCIAL HIGHLIGHTS
(dollars in thousands)
NET SALES
GROSS PROFIT
2023
2022
2021
2020
2019
$4,036,605
$4,032,853
$3,250,792
$2,513,257
$2,959,446
$1,543,062
$1,446,554
$1,194,860
$882,048
$1,103,497
INCOME FROM OPERATIONS
$634,868
$639,604
$629,992
$324,431
$514,043
NET EARNINGS
$400,882
$436,569
$488,492
$207,294
$352,240
EPS ON NET EARNINGS
$7.41
$7.95
$8.62
$3.76
$6.33
WEIGHTED AVERAGE SHARES
54,086,000
54,947,000
56,665,000
55,136,000
55,656,000
CASHFLOW FROM OPERATIONS
$628,790
$332,552
$423,399
$524,785
$377,425
TOTAL ASSETS
TOTAL DEBT
$6,906,692
$6,874,866
$6,383,598
$5,202,474
$5,002,143
$2,425,195
$2,722,324
$2,414,294
$1,729,596
$1,873,140
$.4.2
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3.6
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2.8
2.6
2.4
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1.4
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0
4
$
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$
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3
$
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5
2
$
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'20
'21
'22
'23
NET SALES
(dollars in billions)
$500
400
300
200
100
0
8
8
4
$
7
3
4
$
1
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4
$
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'21
'19
'20
NET EARNINGS
(dollars in millions)
'22
'23
'19
'20
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EPS ON NET EARNINGS
'22
'23
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 December 30, 2023
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.
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.
Yes ý No ¨
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
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b).o
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 1, 2023 was approximately $7,832,982,469.
The number of shares outstanding of the Registrant’s class of common stock, as of February 26, 2024, was 53,603,418 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 2024 annual meeting of stockholders.
Documents Incorporated by Reference
THE MIDDLEBY CORPORATION
DECEMBER 30, 2023
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
PART II
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 1C.
Cybersecurity
Properties
Legal Proceedings
Mine Safety Issues
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
[Reserved]
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosure about Market Risk
Item 8.
Item 9.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
PART III
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.
Exhibit 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, integrated IoT solutions and universal
controllers 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 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 seventy-three brands, including Anets, APW Wyott,
Bakers Pride, Beech Ovens, BKI, Blodgett, Blodgett Combi, Bloomfield, Blue Sparq, Britannia, Carter-Hoffmann, Celfrost,
Concordia, CookTek, Crown, CTX, Desmon, Deutsche Beverage, Doyon, Eswood, EVO, Firex, Flavor Burst, Follett, Frifri,
Globe, Goldstein, Holman, Houno, Hydra Rinse, Icetro, IMC, Imperial, Induc, Jade, JoeTap, Josper, Kloppenberg, L2F, Lang,
Lincat, Marco, MagiKitch’n, Market Forge, Marsal, Marvel Scientific, Middleby Marshall, Newton CFV, Nieco, Nu-Vu,
Perfect Fry, Pitco, Powerhouse Dynamics, QualServ, RAM, Southbend, Ss Brewtech, Star, Starline, Sveba Dahlen, Synesso,
Tank, Taylor, Terry, Thor, Toastmaster, TurboChef, U-Line Commercial, Ultrafryer, Varimixer, Wells, Wild Goose Filling 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, IoT solutions and controls development and manufacturing.
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, pastries, bread and buns. Through its broad line of products, the company is able to deliver a wide array of
food preparation, thermal processing, slicing/packaging, facility automation and equipment sanitation 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 with a uniquely integrated solution ensuring 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-eight brands, including Alkar, Armor Inox, Auto-Bake,
Baker Thermal Solutions, Burford, Colussi Ermes, Cozzini, CV-Tek, Danfotech, Drake, Escher, Filtration Automation, Glimek,
Hinds-Bock, Inline Filling Systems, Key-Log, Maurer-Atmos, MP Equipment, Pacproinc, Proxaut, RapidPak, Scanico, Spooner
Vicars, Stewart Systems, Sveba Dahlen, Thurne, Vemac, and VisionPak.
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, 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, automated washing systems, auto-guided
vehicles, 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-four brands, including AGA, AGA
Cookshop, Brava, Char-Griller, EVO, Kamado Joe, La Cornue, Leisure Sinks, Lynx, Marvel, Masterbuilt, Mercury, Novy,
Rangemaster, Rayburn, Sedona, Ss Brewtech, Stanley, Synesso, Trade-Wind, 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 eighteen acquisitions to add to its portfolio of brands
and technologies of the Commercial Foodservice Equipment Group, Food Processing Equipment Group, and the Residential
Kitchen Equipment Group. These acquisitions have added thirteen brands to the Middleby portfolio and positioned the
company as a leading provider of equipment in each respective industry. These acquisitions were not individually material and
were acquired for an aggregate purchase price totaling $397.5 million, net of cash acquired.
Commercial Foodservice Equipment Group
•
•
•
•
April 2022: The company completed its acquisition of all of the assets of Kloppenberg LLC ("Kloppenberg"), a
manufacturer of ice bins, dispensers, carts, and ice transportation systems, located in Englewood, Colorado.
June 2022: The company completed its acquisition of all of the capital stock of Icetro Co., Ltd. ("Icetro"), a
manufacturer of ice, soft serve and slush machines, located in South Korea.
December 2022: The company completed its acquisition of all the capital stock of Marco Beverage Systems
("Marco"), a leading designer and manufacturer of innovative and energy-efficient beverage dispense solutions,
located in Ireland.
January 2023: The company completed its acquisition of all of the outstanding equity securities of Flavor Burst
Co., LLP ("Flavor Burst"), an innovative technology used in a variety of flavored beverage and soft serve
products, located in Danville, Indiana.
2
•
•
April 2023: The company completed its acquisition of all of the capital stock of Blue Sparq, Inc. ("Blue
Sparq"), a custom hardware and software development company also offering manufacturing services, located
in Cape Coral, Florida.
July 2023: The company completed its acquisition of all of the capital stock of Systems IV and its subsidiary
Terry, LLC ("Systems IV" or "Terry"), a leader in environmentally friendly solutions to eliminate and prevent
scale build up associated with water usage in commercial foodservice equipment including steam, ice and
beverage products, located in Chandler, Arizona.
Food Processing Equipment Group
•
•
•
•
•
June 2022: The company completed its acquisition of all of the capital stock of Proxaut S.r.l. ("Proxaut"), a
leader in auto guided vehicles for the food and industrial processing companies, located in Italy.
July 2022: The company completed its acquisition of all of the capital stock of CP Packaging, LLC ("CP
Packaging"), a leading manufacturer of advanced high-speed vacuum packaging equipment, located in
Appleton, Wisconsin.
July 2022: The company completed its acquisition of all of the capital stock of Colussi Ermes S.r.l. ("Colussi"),
a leading manufacturer of automated washing solutions, located in Italy.
November 2022: The company completed its acquisition of all of the capital stock of Escher Mixers S.r.l
("Escher"), a leading manufacturer of highly engineered spiral and planetary mixers for the industrial baking
industry, located in Italy.
June 2023: The company completed its acquisition of all of the capital stock of Filtration Automation, Inc.
("Filtration Automation"), a leading manufacturer of industrial cooking oil filtration machines for the protein,
snack, and fish industries, located in Mansfield, Texas.
Residential Kitchen Equipment Group
•
July 2023: The company completed its acquisition of all of the capital stock of Trade-Wind Manufacturing,
LLC ("Trade-Wind"), a premier manufacturer of ventilation innovation for indoor and outdoor residential use,
located in Phoenix, Arizona.
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.
3
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.
The company is developing innovations to solve the challenges within our customers' operations. We believe automated
equipment that addresses labor issues will provide our customers a meaningful return on their investment. Innovative
equipment solutions, including integrated IoT platforms and universal controllers, will allow restaurateurs to scale their
operations quickly and leverage data to make operational decisions.
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, sous vide prepared meals 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, automated full processing line solutions.
Food processing historically was highly fragmented; however has quickly become a highly competitive landscape with the
emergence of 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
of consistent quality products 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 large and growing. The company estimates demand for food processing
equipment is in excess of $50.0 billion worldwide.
4
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 as well as their
outdoor entertaining space. The kitchen, both indoors and out, 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, interest rates 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 $250.0
billion worldwide.
Backlog
Commercial Foodservice Equipment Group
The backlog of orders for the Commercial Foodservice Equipment Group was $395.2 million at December 30, 2023, most all of
which is expected to be filled during 2024. The Commercial Foodservice Equipment Group's backlog was $750.9 million at
December 31, 2022. The acquired Flavor Burst and Systems IV businesses accounted for $0.2 million of the backlog. The
backlog is not necessarily indicative of the level of business expected for the year.
Food Processing Equipment Group
The backlog of orders for the Food Processing Equipment Group was $250.4 million at December 30, 2023, which is expected
to be filled by the end of fiscal 2025. The Food Processing Equipment Group's backlog was $317.1 million at December 31,
2022. The acquired Filtration Automation business accounted for less than $0.1 million of the backlog.
Residential Kitchen Equipment Group
The backlog of orders for the Residential Kitchen Equipment Group was $112.1 million at December 30, 2023, all of which is
expected to be filled during 2024. The Residential Kitchen Equipment Group's backlog was $175.0 million at December 31,
2022. The acquired Trade-Wind business accounted for $1.1 million of the backlog.
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. To supplement the sales
strategy, the company has invested in opening Middleby Innovation Kitchens (the MIK) in Dallas and Spain, which provide
chef-driven demonstration and live cooking on over 150 pieces of live Middleby commercial kitchen innovation.
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.
5
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, salespeople 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 by its own food technologists and with
Protein and Bakery Innovation Centers in Chicago, Dallas and India, which 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.
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.
6
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.
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 Berkshire 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-four domestic and twenty international
production facilities. The Food Processing Equipment Group manufactures its products in thirteen domestic and ten
international production facilities. The Residential Kitchen Equipment Group manufactures its products in seven 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.
7
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.
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.
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 Ovens, BKI, Blodgett, Blodgett Combi, Bloomfield, Blue Sparq, Britannia, Carter-Hoffmann, Celfrost,
Concordia, CookTek, Crown, CTX, Desmon, Deutsche Beverage, Doyon, Eswood, EVO, Firex, Flavor Burst, Follett, Frifri,
Globe, Goldstein, Holman, Houno, Hydra Rinse, Icetro, IMC, Imperial, Induc, Jade, JoeTap, Josper, Kloppenberg, L2F, Lang,
Lincat, Marco, MagiKitch’n, Market Forge, Marsal, Marvel Scientific, Middleby Marshall, Newton CFV, Nieco, Nu-Vu,
Perfect Fry, Pitco, Powerhouse Dynamics, QualServ, RAM, Southbend, Ss Brewtech, Star, Starline, Sveba Dahlen, Synesso,
Tank, Taylor, Terry, Thor, Toastmaster, TurboChef, U-Line Commercial, Ultrafryer, Varimixer, Wells, Wild Goose Filling 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, Colussi Ermes, Cozzini, CV-Tek, Danfotech, Drake, Escher, Filtration Automation,
Glimek, Hinds-Bock, Inline Filling Systems, Key-Log, Maurer-Atmos, MP Equipment, Pacproinc, Proxaut, RapidPak, Scanico,
Spooner Vicars, Stewart Systems, Sveba Dahlen, Thurne, Vemac, and VisionPak.
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, Sedona, Ss Brewtech, Stanley, Synesso, Trade-Wind, TurboChef, U-Line, Varimixer and Viking.
8
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.
Human Capital
As of December 30, 2023, 10,722 persons were employed by the company and its subsidiaries among the various groups as
described below. 5,918 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 December 30, 2023.
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 December 30, 2023, 6,276 persons were employed within the Commercial Foodservice Equipment Group. Of
this amount, 2,695 were management, administrative, sales, engineering and supervisory personnel; 3,173 were hourly
production non-union workers; and 408 were hourly production union members. Included in these totals were 2,651
individuals employed outside of the United States, of which 1,405 were management, sales, administrative and
engineering personnel, 1,108 were hourly production non-union workers and 138 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 February 26, 2027. At its Elgin,
Illinois facility, the company has a union contract with the International Brotherhood of Teamsters that expires on July
31, 2025. 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
June 15, 2027. 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 December 30, 2023, 2,130 persons were employed within the Food Processing Equipment Group. Of this
amount, 1,174 were management, administrative, sales, engineering and supervisory personnel; 842 were hourly
production non-union workers; and 114 were hourly production union members. Included in these totals were 1,094
individuals employed outside of the United States, of which 652 were management, sales, administrative and
engineering personnel and 442 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, 2026. Management believes that the
relationships between employees, unions and management are good.
Residential Kitchen Equipment Group
As of December 30, 2023, 2,245 persons were employed within the Residential Kitchen Equipment Group. Of this
amount, 1,107 were management, administrative, sales, engineering and supervisory personnel and 1,138 were hourly
production workers. Included in these totals were 1,059 individuals employed outside of the United States, of which
549 were management, sales, administrative and engineering personnel and 510 were hourly non-union production
workers. Management believes that the relationships between employees and management are good.
Corporate
As of December 30, 2023, 71 persons were employed at the corporate office.
9
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.
Employee Safety
The company is dedicated to providing a safe and healthy workplace by operating in accordance with established health and
safety protocols. The company encourages a culture of safety due to the fact it reduces the risk of injury to employees,
decreases expenses, and increases production. Each of our manufacturing locations maintains active safety committees that
frequently review and assess the safety condition of their local work environment. The company invests in safety training,
shares best practices, and reviews claim activity to continually review our progress in minimizing employee injury incidents in
the workplace.
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
well-positioned 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 among our
employees 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.
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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 materially 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
materially 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, fluctuating interest rates, weakness in the residential
construction, housing and home improvement markets, financial market volatility, inflation, recession, global hostilities and
acts of terrorism have and may in the future 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.
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.
Business and Operational Risks
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 December 30, 2023, the company
had $2.4 billion of borrowings and $1.6 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;
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•
•
•
•
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.
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.
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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.
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 has been and may continue to be adversely affected during any periods of unexpected or rapid
increases in interest rates. The company maintains a revolving credit facility, which, at December 30, 2023, bore interest at
1.625% above Secured Overnight Financing Rate ("SOFR") plus a spread adjustment of 0.10% 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 36% and 19%, respectively, of its total assets as of December 30, 2023. 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.
13
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.
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,
including a focus on developing and manufacturing energy efficient products in a sustainable way. The company’s ability to
compete successfully will depend, in large part, on its ability to enhance and improve its existing products, including its energy
efficient products and products manufactured through a process designed to reduce emissions, 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.
14
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.
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, has and may continue to
adversely affect the company’s operating results. In addition, we have experienced and continue to experience disruptions to
parts of our supply chain. 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— have and may continue to 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.
15
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 contagious diseases or other adverse public health developments, has had a material and adverse effect on our
business operations. These effects have included and may in the future include disruptions or restrictions on our ability to
travel, temporary closures of our or our customers' facilities and disruptions to our supply chain. Any disruption of our, our
suppliers' or our customers' businesses due to adverse public health developments could have a material impact on 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.
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.
16
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.
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.
17
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;
•
•
•
•
•
•
•
•
•
•
uncertain impact on operations, suppliers and customers related to business disruptions in international
jurisdictions;
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.
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, geopolitical threats or hostilities, 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.
18
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 December 30, 2023. 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 February 2027, December 2026, July 2025, June 2027 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, who 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 key personnel or their services under existing agreements. The incapacity, inability or unwillingness of
certain personnel 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.
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.
19
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, have and could in the future 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
materially 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
investment could materially increase our costs and 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 in addition to those already in place, we are and may continue to be subject to substantial penalties if we fail to
comply with data protection laws and regulations.
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.
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.
20
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 climate change legislation, regulation and international accords. In addition,
failure to achieve or demonstrate progress towards our climate goals may expose us to liability and reputational harm.
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.
Additionally, as discussed further in our 2023 Sustainability Report, accessible at www.middleby.com/sustainability, we have
made commitments to reduce the environmental impact of our operations and provide sustainable solutions to our customers,
including setting targets for reducing our Greenhouse Gas (“GHG”) emission and consumption of non-renewable resources.
There can be no assurance that we will achieve our climate-related goals on the timeline anticipated or at all. Further, future
events or circumstances could lead us to prioritize other business interests over progressing toward our current climate goals
due to factors such as business strategy, economic conditions, regulatory changes or pressure from stakeholders. If we fail or
are perceived to fail to progress toward achieving our climate-related goals and commitments or if our investors, customers or
other stakeholders become dissatisfied with the level of GHG emissions produced by our production process or our products,
we could face adverse publicity, which could have a material adverse impact on our business, financial condition and results of
operations
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.
In December 2021, The Organisation for Economic Co-operation and Development ("OECD") issued Pillar II model rules
which would establish a global per-country minimum tax of 15%. The directive requires the rules to initially become effective
for fiscal years starting on or after December 31, 2023. While it is uncertain whether the United States will enact legislation to
adopt Pillar II, numerous countries have enacted legislation, or have indicated their intent to adopt legislation, to implement
certain aspects of Pillar II effective January 1, 2024, and the remaining global minimum tax rules by January 1, 2025. The
OECD and implementing countries are expected to continue to make further revisions to their legislation and release additional
guidance.
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.
Item 1C. Cybersecurity
Risk Management and Strategy
The company maintains a cybersecurity risk management program as part of its overall risk management framework and
regularly assesses risks from cybersecurity threats, monitors its information systems for potential vulnerabilities and tests those
systems pursuant to the company’s cybersecurity standards, processes, and practices. To protect the company’s information
systems from cybersecurity threats, the company uses various security tools that help the company identify, escalate,
investigate, resolve, and recover from security incidents in a timely manner. These efforts include but are not limited to, internal
reporting, engaging third-party service providers to actively monitor information systems, performing vulnerability testing
using external third-party tools and techniques to test security controls, conducting employee training, monitoring emerging
trends and regulations related to information security, and implementing appropriate changes, as needed, to our cybersecurity
risk management program.
The company partners with third parties to assess the effectiveness of our cybersecurity prevention and response systems and
processes. These assessments include penetration testing, vulnerability assessments, tabletop exercises, and reviews of incident
response protocols that are designed to ensure robust protections against evolving threats.
The company has processes that aim to validate security controls and engages third parties to design or assess security
architecture, and certifications. This includes assessing the potential fourth-party risks related to employee, business, and
customer data. During the third-party procurement and contracting process, the company incorporates contract provisions that
are designed to align with applicable regulations and industry benchmarks.
To date, the Company is not aware of cybersecurity threats, including as a result of any previous cybersecurity incidents, that
have materially affected or are reasonably likely to affect the Company, including its business strategy, results of operations or
financial condition. Refer to the risk factor captioned “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” in Part I, Item 1A. “Risk Factors” for additional description of
cybersecurity risks and potential related impacts on the Company.
22
Governance
The company takes a risk-based approach to cybersecurity and has implemented cybersecurity policies throughout its
operations that are designed to address cybersecurity threats and incidents. In particular, the company dedicates significant
resources in an effort to secure its confidential information as well as the data and any personal information the Company
receives and stores about its customers and employees. The company has systems in place designed to securely receive and
store that information and to detect, contain, and respond to data security incidents.
The company has a robust information security training and compliance program for all new and existing employees. Training
is provided at least annually, with a formal communication cadence of additional components of training being provided
throughout the year. Employee cybersecurity proficiency is assessed quarterly, with supplementary training programs tailored
to individual needs based on these evaluations. The company has not experienced a material cybersecurity or information
security breach in the last three years.
The company maintains a program, run by the company’s Director of Information Technology, overseen by the company’s
Chief Financial Officer, that is designed to protect and preserve the confidentiality, integrity and continued availability of all
information owned by or in the care of the company. The company has implemented a cybersecurity incident response plan that
provides controls and procedures to facilitate timely and accurate reporting of any material cybersecurity incident. The initial
impact of each cybersecurity event is evaluated by a designated cybersecurity team using established risk criteria. If a
cybersecurity event meets certain of these criteria, it is escalated to an internal cross-functional Cyber Incident Response Team
and external incident responders. The company has a cyber incident disclosure committee that evaluates and considers whether
public disclosure of an event is required. The plan also contains procedures for escalating cybersecurity incidents to the Board
of Directors.
The company’s Director of Global Information Technology is responsible for leading the assessment and management of
cybersecurity risks. The current Director of Global Information Technology has over 10 years of experience in information
security and holds CISSP and GIAC credentials. The Director of Global Information Technology reports to the Audit
Committee and management on cybersecurity threats on a regular basis.
Oversight responsibility for information security matters is shared by the Board (primarily through the Audit Committee) and
senior management. The Audit Committee oversees the company’s cybersecurity and information security program and
receives periodic updates from senior management on cybersecurity and information security matters. The Director of Global
Information Technology or key members of the executive leadership team update the Audit Committee periodically on the
cybersecurity landscape, including the status of ongoing threats and company initiatives.
23
Item 2. Properties
The company's principal executive offices are located in Elgin, Illinois. The company operates forty-four manufacturing
facilities in the U.S. and thirty-five manufacturing facilities internationally.
The principal properties of the company used to conduct business operations are listed below:
Location
Commercial Foodservice:
Fort Smith, AR
Chandler, AZ
Brea, CA
Corona, CA
Vacaville, CA
Windsor, CA
Englewood, CO
Louisville, CO
Cape Coral, FL
Elgin, IL
Mundelein, IL
Rockton, IL
South Beloit, IL
Danville, IN
Menominee, MI
Charlotte, NC
Fuquay-Varina, NC
Bow, NH
Pembroke, NH
Dayton, OH
Moraine, OH
Tualatin, OR
Easton, PA
Smithville, TN
Carrollton, TX
Essex Junction, VT*
Renton, WA
New South Wales, Australia
Toronto, Canada*
Humen, China
Ningbo, China
Qingdao City, China
Zhuhai City, China
Brøndby, Denmark
Randers, Denmark
Viljandi, Estonia
Dublin, Ireland
Nusco, Italy
Sedico, Italy
Nogales, Mexico
Wiślina, Poland
Incheon, South Korea
Pineda de Mar, Spain
Arenys, Spain
Fristad, Sweden
Laguna, the Philippines
Lincoln, the United Kingdom
Principal Function
Square Footage Owned/Leased Lease Expiration
Manufacturing, Warehousing and Offices
Manufacturing 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
Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Warehousing
Manufacturing and Offices
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
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, 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
Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
24
712,600
14,400
86,600
86,000
128,800
75,000
105,000
37,700
16,000
191,200
70,000
339,400
171,700
32,500
60,000
44,000
183,900
100,000
171,300
37,700
38,300
29,500
246,700
268,000
148,500
372,500
72,400
204,900
87,700
10,900
64,300
113,500
134,900
50,900
50,100
47,000
17,100
260,600
52,500
129,000
77,500
227,400
69,200
63,500
173,800
115,200
100,000
Leased
Owned
Leased
Owned
Leased
Leased
Owned
Leased
Owned
Owned
Owned
Owned
Leased
Owned
Owned
Leased
Owned
Owned
Leased
Owned
Leased
Leased
Owned
Owned
Leased
Owned
Leased
Owned
Owned
Leased
Leased
Leased
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Owned
Owned
Owned
Jan-26
N/A
Sep-26
N/A
Nov-29
Apr-32
N/A
Jul-28
N/A
N/A
N/A
N/A
Mar-24
N/A
N/A
Feb-24
N/A
N/A
Jul-24
N/A
Jun-27
May-28
N/A
N/A
Aug-32
N/A
Sep-28
N/A
N/A
Mar-24
Oct-25
Jul-29
Dec-25
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Dec-41
N/A
N/A
N/A
Principal Function
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
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Location
Food Processing:
Venice, FL
Gainesville, GA
Algona, IA
Elgin, IL
Elk Grove, IL
Clayton, NC
Maysville, OK
Souderton, PA
Mansfield, TX
Plano, TX
Waynesboro, VA
Appleton, WI
Lodi, WI
Aalborg, Denmark
Mauron, France
Reichenau, Germany
Bangalore, India
Casarsa della Delizia, Italy
Casarsa della Delizia, Italy
Castelnuovo Rangone, Italy
Piumazzo, Italy
Vicenza, Italy
Norwich, the United Kingdom
Residential Kitchen:
Phenix City, AL
Phoenix, AZ
Chino, CA
Redwood City, CA
Buford, GA
Greenville, MI
Greenwood, MS**
York, PA
Brown Deer, WI
Kuurne, Belgium
Saint Ouen L'aumone, France
Waterford, Ireland
Ketley, the United Kingdom
Leamington Spa, the United
Kingdom
Leamington Spa, the United
Kingdom
Nottingham, the United Kingdom Warehousing and Offices
Warehousing and Offices
Manufacturing, Warehousing and Offices
Warehousing and Offices
Warehousing and Offices
Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing and Warehousing
Warehousing and Offices
Manufacturing and Offices
Manufacturing and Offices
Manufacturing and Offices
Square Footage Owned/Leased Lease Expiration
23,300
107,400
70,100
75,000
101,500
65,000
36,300
50,000
46,200
339,100
24,700
20,000
114,600
68,300
107,200
57,900
141,100
130,700
83,300
26,800
32,900
53,500
30,000
335,000
65,400
100,000
20,600
178,100
225,000
738,300
204,300
165,600
242,300
30,400
73,000
217,300
270,200
100,300
153,100
Leased
Owned
Owned
Owned
Leased
Leased
Owned
Owned
Owned
Leased
Owned
Owned
Owned
Leased
Owned
Owned
Leased
Owned
Leased
Leased
Leased
Leased
Owned
Leased
Owned
Leased
Leased
Leased
Owned
Owned
Leased
Leased
Owned
Owned
Leased
Owned
Owned
Leased
Owned
Jun-24
N/A
N/A
N/A
Nov-29
Oct-24
N/A
N/A
N/A
Apr-25
N/A
N/A
N/A
Jan-26
N/A
N/A
Jul-30
N/A
May-33
Dec-26
Mar-30
Sep-32
N/A
Dec-30
N/A
Apr-27
Jul-24
Jun-28
N/A
N/A
Jun-30
Nov-26
N/A
N/A
Jul-27
N/A
N/A
Aug-29
N/A
* Contains two separate manufacturing facilities.
** Contains four separate manufacturing facilities.
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, 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.
25
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.
26
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 78,823 record holders of the company's common stock as of February 26,
2024.
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 January 24, 2023, in connection with the company’s purchase of all of the capital stock of Flavor Burst Co., LLP (“Flavor
Burst”), the company issued 6,956 unregistered shares of the company’s common stock to Flavor Burst. 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 Flavor Burst, including its status as an
accredited investor, as such term is defined in Rule 501 of the Securities Act.
On January 26, 2023, in connection with the company’s purchase of assets from Appliance Innovation, Inc ("Appliance"), the
company issued 27,395 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 API, including its status as an accredited investor, as such
term is defined in Rule 501 of the Securities Act.
On April 3, 2023, in connection with the company’s purchase of all of the capital stock of Blue Sparq, Inc. (“Blue Sparq”), the
company issued 10,231 unregistered shares of the company’s common stock to Blue Sparq. 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 Blue Sparq, including its status as an accredited investor,
as such term is defined in Rule 501 of the Securities Act.
On June 13, 2023, in connection with the company’s purchase of all of the capital stock of Filtration Automation, Inc.
(“Filtration Automation”), the company issued 49,916 unregistered shares of the company’s common stock to Filtration
Automation. 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 Filtration
Automation, including its status as an accredited investor, as such term is defined in Rule 501 of the Securities Act.
On July 31, 2023, in connection with the company’s purchase of all of the capital stock of Trade-Wind Manufacturing, LLC
(“Trade-Wind”), the company issued 39,573 unregistered shares of the company’s common stock to Trade-Wind. 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 Trade-Wind, including its status as an
accredited investor, as such term is defined in Rule 501 of the Securities Act.
27
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 1, 2023 to October 28, 2023
October 29, 2023 to November 25, 2023
November 26, 2023 to December 30,
2023
Quarter ended December 30, 2023
— $
—
—
— $
—
—
—
—
—
—
—
—
1,883,636
1,883,636
1,883,636
1,883,636
(1) On November 7, 2017, the company's Board of Directors resolved to terminate the company's existing share repurchase
program, effective as of such date, which was originally adopted in 1998, and approved a new 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
May 2022, the company's Board of Directors approved the company to repurchase an additional 2,500,000 shares of its
outstanding common stock under the current program. As of December 30, 2023, the total number of shares authorized for
repurchase under the program is 5,000,000. As of December 30, 2023, 3,116,364 shares had been purchased under the stock
repurchase program and 1,883,636 shares remained authorized for repurchase.
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.
Item 6. [Reserved]
28
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.
29
Current Events
Inflation and Interest Rate Environment
The company has been negatively impacted by inflation in wages, logistics, energy, raw materials and component costs. Price
increases and pricing strategies have been implemented to mitigate the impact of cost inflation on margins and the company
continues to actively monitor costs. High inflation led to increased interest rates throughout 2022 and through the first six
months of 2023, which combined with global macroeconomic uncertainty has and may continue to impact customer demand.
Most notably in our residential segment, we have faced recent demand headwinds due to macroeconomic conditions. Even in
light of such headwinds, we remain focused on delivering strong financial results and executing on our long-term strategy and
profitability objectives.
Supply Chain, Labor and Logistics Constraints
The company continues to actively monitor global supply chain, labor and logistics constraints, which have had a negative
impact on the company's ability to source parts and complete and ship units. While the company is seeing improvement on
certain supply chain and logistics constraints, supply chains for certain key components remain distressed. The decreased
availability of resources and inflationary costs have resulted in heightened inventory levels. To combat these pressures, the
company has evaluated alternative sourcing, dual sourcing and collaborated across the organization, where appropriate, without
materially presenting new risks or increasing current risks around quality and reliability. Our capital resources have been and
the company expects they will continue to be sufficient to address these challenges.
NET SALES SUMMARY
(dollars in thousands)
Fiscal Year Ended(1)
Business Segments:
2023
2022
2021
Sales
Percent
Sales
Percent
Sales
Percent
Commercial Foodservice
$ 2,521,471
62.5 % $ 2,394,763
59.4 % $ 2,014,372
62.0 %
Food Processing
720,618
17.8
589,968
14.6
499,135
15.3
Residential Kitchen
794,516
19.7
1,048,122
26.0
737,285
22.7
Total
$ 4,036,605
100.0 % $ 4,032,853
100.0 % $ 3,250,792
100.0 %
(1)
The company's fiscal year ends on the Saturday nearest to December 31.
30
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
Impairments
Merger termination fee
Income from operations
Interest expense and deferred financing amortization, net
Net periodic pension benefit (other than service cost & curtailment)
Other expense (income), net
Earnings before income taxes
Provision for income taxes
Net earnings
2023
Fiscal Year Ended(1)
2022
2021
100.0 %
62.0
38.0
20.0
0.4
1.9
—
15.7
3.0
(0.2)
0.1
12.8
2.9
9.9 %
100.0 %
64.1
35.9
19.8
0.2
—
—
15.9
2.2
(1.0)
0.7
14.0
3.2
10.8 %
100.0 %
63.2
36.8
20.5
0.3
—
(3.4)
19.4
1.8
(1.4)
—
19.0
4.0
15.0 %
(1)
The company's fiscal year ends on the Saturday nearest to December 31.
31
Fiscal Year Ended December 30, 2023 as Compared to December 31, 2022
NET SALES. Net sales in fiscal 2023 increased by $3.7 million, or 0.1%, to $4,036.6 million as compared to $4,032.9 million
in fiscal 2022. Net sales increased by $121.3 million, or 3.0%, from the fiscal 2022 acquisitions of Kloppenberg, Proxaut,
Icetro, CP Packaging, Colussi Ermes, Escher, Marco, and the fiscal 2023 acquisitions of Flavor Burst, Blue Sparq, Filtration
Automation, Terry, and Trade-Wind. Excluding acquisitions, net sales decreased $117.6 million, or 2.9%, from the prior year.
The impact of foreign exchange rates on foreign sales translated into U.S. Dollars for fiscal 2023 increased net sales by
approximately $12.3 million. Excluding the impact of foreign exchange and acquisitions, sales decreased 3.2% for the year,
including a net sales increase of 2.7% at the Commercial Foodservice Equipment Group, a net sales increase of 10.7% at the
Food Processing Equipment Group and a net sales decrease of 24.7% at the Residential Kitchen Equipment Group.
•
•
•
Net sales of the Commercial Foodservice Equipment Group increased by $126.7 million, or 5.3%, to $2,521.5
million in fiscal 2023 as compared to $2,394.8 million in fiscal 2022. Net sales from the acquisitions of
Kloppenberg, Icetro, Marco, Flavor Burst, Blue Sparq, and Terry, which were acquired on April 25, 2022, June
30, 2022, December 20, 2022, January 24, 2023, April 3, 2023 and July 5, 2023, respectively, accounted for an
increase of $57.8 million during fiscal 2023. Excluding the impact of acquisitions, net sales of the Commercial
Foodservice Equipment Group increased $68.9 million, or 2.9%, as compared to the prior year. Excluding the
impact of foreign exchange and acquisitions, net sales increased $65.8 million, or 2.7% at the Commercial
Foodservice Equipment Group. Domestically, the company realized a sales increase of $77.4 million, or 4.4%, to
$1,828.4 million, as compared to $1,751.0 million in the prior year. This includes an increase of $24.9 million
from recent acquisitions. Excluding acquisitions, the net increase in domestic sales was $52.5 million, or 3.0%.
The increase in domestic sales is related to higher shipments, improved product mix and pricing increases.
International sales increased $49.3 million, or 7.7%, to $693.1 million, as compared to $643.8 million in the prior
year. This includes the increase of $32.9 million from recent acquisitions and an increase of $3.1 million related to
the favorable impact of exchange rates. Excluding acquisitions and foreign exchange, the net sales increase in
international sales was $13.3 million, or 2.1%. The increase in international sales is related to improvements in
market conditions, primarily in the Asia and Latin American markets.
Net sales of the Food Processing Equipment Group increased by $130.6 million, or 22.1%, to $720.6 million in
fiscal 2023, as compared to $590.0 million in fiscal 2022. Net sales from the acquisitions of CP Packaging,
Colussi Ermes, Escher, and Filtration Automation, which were acquired on July 12, 2022, July 27, 2022,
November 10, 2022, and June 13, 2023, respectively, accounted for an increase of $61.5 million during fiscal
2022. Excluding the impact of acquisitions, net sales of the Food processing Equipment Group increased $69.1
million, or 11.7%, as compared to the prior year. Excluding the impact of foreign exchange and acquisitions, net
sales increased $63.4 million, or 10.7% at the Food Processing Equipment Group. Domestically, the company
realized a sales increase of $53.1 million, or 12.5%, to $479.3 million, as compared to $426.2 million in the prior
year. This includes an increase of $23.7 million from recent acquisitions. Excluding acquisitions, the net increase
in domestic sales was $29.4 million, or 6.9%. The increase in domestic sales reflects growth primarily driven by
protein products. International sales increased $77.5 million, or 47.3%, to $241.3 million, as compared to $163.8
million in the prior year. This includes the increase of $37.8 million from recent acquisitions and an increase of
$5.7 million related to the favorable impact of exchange rates. Excluding acquisitions and foreign exchange, the
net sales increase in international sales was $34.0 million, or 20.8%. The increase in international sales reflects
growth primarily driven by bakery products.
Net sales of the Residential Kitchen Equipment Group decreased by $253.6 million, or 24.2%, to $794.5 million
in fiscal 2023, as compared to $1,048.1 million in fiscal 2022. Excluding the impact of the acquisition of Trade-
Wind, acquired July 31, 2023, net sales decreased $255.6 million, or 24.4%, as compared to the prior year.
Excluding the impact of foreign exchange and the acquisition, net sales decreased $259.1 million, or 24.7% at the
Residential Kitchen Equipment Group. Domestically, the company realized a sales decrease of $188.6 million, or
26.9%, to $513.3 million, as compared to $701.9 million in the prior year. Excluding the acquisition, the net
decrease in domestic sales was $190.0 million, or 27.1%. International sales decreased $65.0 million, or 18.8% to
$281.2 million, as compared to $346.2 million in the prior year. This includes an increase of $3.5 million related
to the favorable impact of exchange rates. Excluding the acquisition and foreign exchange, the net sales decrease
in international sales was $69.1 million, or 20.0%. The decrease in domestic and international sales was driven by
challenging market conditions and higher inventory levels in various channels.
.
32
GROSS PROFIT. Gross profit increased by $87.5 million to $1,534.1 million in fiscal 2023 from $1,446.6 million in fiscal
2022, primarily reflecting higher sales volumes at the Commercial Foodservice Equipment Group and Food Processing
Equipment Group. The impact of foreign exchange rates increased gross profit by $3.9 million. The gross profit margin rate
increased to 38.0% in 2023 as compared to 35.9% in 2022. The gross margin in fiscal 2022 was negatively impacted by
inventory step-up charges associated with acquisitions. In addition, higher sales volumes and improved product mix have
contributed to the expansion of the gross margin rate. The gross margin rate in fiscal 2023 excluding acquisitions and impact of
foreign exchange was 38.1%.
•
•
•
Gross profit at the Commercial Foodservice Equipment Group increased by $101.2 million, or 11.1%, to $1,010.6
million in fiscal 2023 as compared to $909.4 million in fiscal 2022. Gross profit from acquisitions increased gross
profit by $20.8 million. Excluding acquisitions, gross profit increased by $80.4 million. The impact of foreign
exchange rates increased gross profit by approximately $0.4 million. The gross profit margin rate increased to
40.1% in fiscal 2023 as compared to 38.0% in the prior year related to higher sales volumes and improved product
mix. The gross profit margin rate in fiscal 2023 excluding acquisitions and the impact of foreign exchange was
40.2%.
Gross profit at the Food Processing Equipment Group increased by $61.8 million, or 29.1%, to $274.4 million in
fiscal 2023 as compared to $212.6 million in fiscal 2022. Gross profit from acquisitions increased gross profit by
$23.1 million. Excluding acquisitions, gross profit increased by $38.7 million. The impact of foreign exchange
rates increased gross profit by approximately $2.3 million. The gross profit margin rate increased to 38.1% in
fiscal 2023 as compared to 36.0% in the prior year related to higher sales volumes, improved product mix and
acquisition integration benefits. The gross profit margin rate in fiscal 2023 excluding the impact of foreign
exchange was 38.1%.
Gross profit at the Residential Kitchen Equipment Group decreased by $75.8 million, or 23.3%, to $250.0 million
in fiscal 2023 as compared to $325.8 million in fiscal 2022. The impact of foreign exchange rates increased gross
profit by approximately $1.2 million. The gross margin rate increased to 31.5% in fiscal 2023 as compared to
31.1% in the prior year. Gross profit margins in the prior year were negatively impacted by acquisitions,
including $15.1 million of acquisition related inventory step-up charges. The gross profit margin rate in fiscal
2023 excluding the acquisition and the impact of foreign exchange was 31.4%.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. Combined selling, general, and administrative expenses
increased by $9.7 million to $806.9 million in fiscal 2023 from $797.2 million in 2022. As a percentage of net sales, selling,
general and administrative expenses amounted to 20.0% in fiscal 2023 and 19.8% in fiscal 2022.
Selling, general and administrative expenses reflect increased costs of $33.6 million associated with acquisitions, including
$5.6 million of non-cash intangible amortization expense. Selling, general and administrative expenses decreased from lower
compensation costs, professional fees, and intangible amortization expense, partially offset by higher selling and marketing
expenses. Foreign exchange rates had an unfavorable impact of $2.2 million.
RESTRUCTURING EXPENSES. Restructuring expenses increased $4.4 million to $14.1 million from $9.7 million in the
prior year period. In fiscal 2023, restructuring expenses related primarily to headcount reductions and facility consolidations
within the Commercial Foodservice Equipment Group and Residential Kitchen Equipment Group. During fiscal 2022,
restructuring charges related primarily to non-cash restructuring valuation allowances on balances associated with activities in
Russia and headcount reductions and facility consolidations within the Commercial Foodservice Equipment Group and
Residential Kitchen Equipment Group.
IMPAIRMENTS. In fiscal 2023, the company recognized non-cash impairment of $78.1 million primarily associated with
several trademarks in the Residential Kitchen Equipment Group in conjunction with diminution of values as we assessed recent
market conditions and future business plans. See note 3 (f) to the Consolidated Financial Statements for further information on
the annual impairment testing.
INCOME FROM OPERATIONS. Income from operations decreased $4.7 million to $634.9 million in fiscal 2023 from
$639.6 million in fiscal 2022. Operating income as a percentage of net sales amounted to 15.7% in 2023 as compared to 15.9%
in 2022. During fiscal 2023, operating income included the impairment of intangible assets. Excluding the impairment, the
increase in operating income resulted from increased profitability driven by product mix and execution of strategic cost
initiatives.
33
Income from operations in 2023 included $254.5 million of non-cash expenses, including $50.4 million of depreciation
expense, $75.0 million of intangible amortization related to acquisitions, $78.1 million of impairments of trademarks and $51.0
million of stock based compensation. This compares to $189.3 million of non-cash expenses in the prior year, including $44.6
million of depreciation expense, $86.3 million of intangible amortization related to acquisitions and $58.4 million of stock
based compensation costs.
NON-OPERATING EXPENSES. Non-operating expenses increased $40.2 million to $115.4 million of expense in fiscal 2023
from $75.2 million of expense in fiscal 2022. Net interest expense and deferred financing increased $31.3 million to $120.3
million in fiscal 2023 from $89.0 million in fiscal 2022 reflecting the increase in interest rates under our current credit facility.
Net periodic pension benefit (other than service costs and curtailment) decreased $33.6 million to $9.1 million in fiscal 2023
from $42.7 million in fiscal 2022 related to the increase in discount rate used to calculate the interest cost. Other expense was
$4.2 million during fiscal 2023 as compared to other expense of $28.9 million during fiscal 2022, consisting mainly of foreign
exchange losses and gains.
INCOME TAXES. A tax provision of $118.5 million, at an effective rate of 22.8%, was recorded for fiscal 2023 as compared
to $127.8 million at an effective rate of 22.7%, in fiscal 2022. The fiscal 2023 tax provision includes a $7.0 million tax benefit
for the finalization of the 2022 tax returns. The fiscal 2022 tax provision included a deferred tax benefit of approximately $13
million associated with legal entity restructuring the company undertook to integrate and simplify the company’s business
operations.The effective rates in 2023 and 2022 were higher than the federal tax rate of 21% primarily due to state taxes and
foreign tax rate differentials.
34
Fiscal Year Ended December 31, 2022 as Compared to January 1, 2022
NET SALES. Net sales in fiscal 2022 increased by $782.1 million, or 24.1%, to $4,032.9 million as compared to $3,250.8
million in fiscal 2021. Net sales increased by $433.6 million, or 13.3%, from the fiscal 2021 acquisitions of Novy, Imperial,
Newton CFV, Char-Griller, Kamado Joe and Masterbuilt and the fiscal 2022 acquisitions of Kloppenberg, Proxaut, Icetro, CP
Packaging, Colussi, Escher, and Marco. Excluding acquisitions, net sales increased $348.5 million, or 10.7%, from the prior
year. The impact of foreign exchange rates on foreign sales translated into U.S. Dollars for fiscal 2022 decreased net sales by
approximately $85.0 million. Excluding the impact of foreign exchange and acquisitions, sales increased 13.3% for the year,
including a net sales increase of 16.7% at the Commercial Foodservice Equipment Group, a net sales increase of 13.2% at the
Food Processing Equipment Group and a net sales increase of 4.3% at the Residential Kitchen Equipment Group.
•
•
•
Net sales of the Commercial Foodservice Equipment Group increased by $380.4 million, or 18.9%, to $2,394.8
million in fiscal 2022 as compared to $2,014.4 million in fiscal 2021. Net sales from the acquisitions of Imperial,
Newton CFV, Kloppenberg, Icetro, and Marco, which were acquired on September 24, 2021, November 16, 2021,
April 25, 2022, June 30, 2022, and December 20, 2022, respectively, accounted for an increase of $84.6 million
during fiscal 2022. Excluding the impact of acquisitions, net sales of the Commercial Foodservice Equipment
Group increased $295.8 million, or 14.7%, as compared to the prior year. Excluding the impact of foreign
exchange and acquisitions, net sales increased $336.1 million, or 16.7% at the Commercial Foodservice
Equipment Group. Domestically, the company realized a sales increase of $333.4 million, or 23.5%, to $1,751.0
million, as compared to $1,417.6 million in the prior year. This includes an increase of $70.7 million from recent
acquisitions. Excluding acquisitions, the net increase in domestic sales was $262.7 million, or 18.5%. The increase
in domestic sales is related to improvements in market conditions, consumer demand, and pricing increases.
International sales increased $47.0 million, or 7.9%, to $643.8 million, as compared to $596.8 million in the prior
year. This includes the increase of $13.9 million from recent acquisitions and a decrease of $40.3 million related
to the unfavorable impact of exchange rates. Excluding acquisitions and foreign exchange, the net sales increase in
international sales was $73.4 million, or 12.3%. The increase in international sales is related to improvements in
market conditions, primarily in the European and Latin American markets.
Net sales of the Food Processing Equipment Group increased by $90.9 million, or 18.2%, to $590.0 million in
fiscal 2022, as compared to $499.1 million in fiscal 2021. Net sales from the acquisitions of Proxaut, CP
Packaging, Colussi, and Escher, which were acquired on June 29, 2022, July 12, 2022, July 27, 2022, and
November 10, 2022, respectively, accounted for an increase of $41.3 million during fiscal 2022. Excluding the
impact of acquisitions, net sales of the Food processing Equipment Group increased $49.6 million, or 9.9%, as
compared to the prior year. Excluding the impact of foreign exchange and acquisitions, net sales increased $65.8
million, or 13.2% at the Food Processing Equipment Group. Domestically, the company realized a sales increase
of $61.4 million, or 16.8%, to $426.2 million, as compared to $364.8 million in the prior year. This includes an
increase of $11.3 million from recent acquisitions. Excluding acquisitions, the net increase in domestic sales was
$50.1 million, or 13.7%. The increase in domestic sales reflects growth primarily driven by protein products.
International sales increased $29.5 million, or 22.0%, to $163.8 million, as compared to $134.3 million in the
prior year. This includes the increase of $30.0 million from recent acquisitions and a decrease of $16.2 million
related to the unfavorable impact of exchange rates. Excluding acquisitions and foreign exchange, the net sales
increase in international sales was $15.7 million, or 11.7%. The increase in international sales reflects growth
primarily driven by protein products.
Net sales of the Residential Kitchen Equipment Group increased by $310.8 million, or 42.2%, to $1,048.1 million
in fiscal 2022, as compared to $737.3 million in fiscal 2021. 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 $307.7 million during fiscal 2022. Excluding the impact of
acquisitions, net sales of the Residential Kitchen Equipment Group increased $3.1 million, or 0.4%, as compared
to the prior year. Excluding the impact of foreign exchange and acquisitions, net sales increased $31.6 million, or
4.3% at the Residential Kitchen Equipment Group. Domestically, the company realized a sales increase of $247.5
million, or 54.5%, to $701.9 million, as compared to $454.4 million in the prior year. This includes an increase of
$204.2 million from recent acquisitions. Excluding acquisitions, the net increase in domestic sales was $43.3
million, or 9.5%. The increase in domestic sales reflects the strong demand for our premium appliance brands.
International sales increased $63.3 million, or 22.4% to $346.2 million, as compared to $282.9 million in the prior
year. This includes an increase of $103.5 million from recent acquisitions and a decrease of $28.5 million related
to the unfavorable impact of exchange rates. Excluding acquisitions and foreign exchange, the net sales decrease
in international sales was $11.7 million, or 4.1%. The decrease in international sales was primarily driven by
challenging market conditions in the European market.
35
GROSS PROFIT. Gross profit increased by $251.7 million to $1,446.6 million in fiscal 2022 from $1,194.9 million in fiscal
2021, primarily reflecting higher sales volumes related to improvements in market conditions and consumer demand, partially
offset by the unfavorable impact of foreign exchange rates of $33.1 million. The gross profit margin rate decreased to 35.9% in
2022 as compared to 36.8% in 2021. The gross margin rate in fiscal 2022 excluding acquisitions and impact of foreign
exchange was 37.5%. Gross profit margins have been negatively impacted by acquisitions, including $17.4 million of
acquisition related inventory step-up charges, along with rising costs of many raw materials and inputs, higher labor rates, and
logistics costs.
•
•
•
Gross profit at the Commercial Foodservice Equipment Group increased by $164.1 million, or 22.0%, to $909.4
million in fiscal 2022 as compared to $745.3 million in fiscal 2021. Gross profit from acquisitions increased gross
profit by $29.8 million. Excluding acquisitions, gross profit increased by $134.3 million related to higher sales
volumes. The impact of foreign exchange rates decreased gross profit by approximately $15.2 million. The gross
profit margin rate increased to 38.0% in fiscal 2022 as compared to 37.0% in the prior year. The gross profit
margin rate in fiscal 2022 excluding acquisitions and the impact of foreign exchange was 38.1%.
Gross profit at the Food Processing Equipment Group increased by $30.8 million, or 16.9%, to $212.6 million in
fiscal 2022 as compared to $181.8 million in fiscal 2021. Gross profit from acquisitions increased gross profit by
$12.2 million. Excluding acquisitions, gross profit increased by $18.6 million related to higher sales volumes. The
impact of foreign exchange rates decreased gross profit by approximately $7.3 million. The gross profit margin
rate decreased to 36.0% in fiscal 2022 as compared to 36.4% in the prior year. The gross profit margin rate in
fiscal 2022 excluding the impact of foreign exchange was 36.8%.
Gross profit at the Residential Kitchen Equipment Group increased by $57.2 million, or 21.3%, to $325.8 million
in fiscal 2022 as compared to $268.6 million in fiscal 2021. Gross profit from acquisitions increased gross profit
by $54.8 million. Excluding acquisitions, gross profit increased by $2.4 million. The impact of foreign exchange
rates decreased gross profit by approximately $10.6 million. The gross margin rate decreased to 31.1% in fiscal
2022 as compared to 36.4% in the prior year. Gross profit margins have been negatively impacted by acquisitions,
including $15.1 million of acquisition related inventory step-up charges. The gross profit margin rate in fiscal
2022 excluding acquisitions and the impact of foreign exchange was 36.6%.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. Combined selling, general, and administrative expenses
increased by $129.2 million to $797.2 million in fiscal 2022 from $668.0 million in 2021. As a percentage of net sales, selling,
general and administrative expenses amounted to 19.8% in fiscal 2022 and 20.5% in fiscal 2021.
Selling, general and administrative expenses reflect increased costs of $88.1 million associated with acquisitions, including
$22.7 million of non-cash intangible amortization expense. Selling, general and administrative expenses increased from
compensation, selling and commissions expenses, partially offset by lower professional fees and intangible amortization
expense. Foreign exchange rates had a favorable impact of $15.1 million.
RESTRUCTURING EXPENSES. Restructuring expenses increased $2.0 million to $9.7 million from $7.7 million in the
prior year period. In fiscal 2022, restructuring expenses related primarily to headcount reductions and facility consolidations
within the Commercial Foodservice Equipment Group and Residential Kitchen Equipment Group and non-cash restructuring
valuation allowances on balances associated with activities in Russia. During fiscal 2021, restructuring charges related
primarily to headcount reductions and facility consolidations within the Commercial Foodservice Equipment Group.
INCOME FROM OPERATIONS. Income from operations increased $9.6 million to $639.6 million in fiscal 2022 from
$630.0 million in fiscal 2021. Operating income as a percentage of net sales amounted to 15.9% in 2022 as compared to 19.4%
in 2021. During fiscal 2021, the company received approximately $67.7 million in a termination fee, net of deal costs and
taxes. The increase in operating income resulted from increased sales volumes driven by acquisitions and improved market
conditions.
Income from operations in 2022 included $189.3 million of non-cash expenses, including $44.6 million of depreciation
expense, $86.3 million of intangible amortization related to acquisitions and $58.4 million of stock based compensation. This
compares to $160.8 million of non-cash expenses in the prior year, including $42.7 million of depreciation expense, $75.8
million of intangible amortization related to acquisitions and $42.3 million of stock based compensation costs.
36
NON-OPERATING EXPENSES. Non-operating expenses increased $64.7 million to $75.2 million of expense in fiscal 2022
from $10.5 million of expense in fiscal 2021. Net interest expense and deferred financing increased $31.8 million to $89.0
million in fiscal 2022 from $57.2 million in fiscal 2021 reflecting the increase in interest rates and borrowing levels under our
current credit facility. Net periodic pension benefit (other than service costs and curtailment) decreased $2.4 million to $42.7
million in fiscal 2022 from $45.1 million in fiscal 2021. Other expense was $28.9 million during fiscal 2022 as compared to
other income of $1.6 million during fiscal 2021, consisting mainly of foreign exchange losses and gains.
INCOME TAXES. A tax provision of $127.8 million, at an effective rate of 22.7%, was recorded for fiscal 2022 as compared
to $131.0 million at an effective rate of 21.1%, in fiscal 2021. The fiscal 2022 tax provision includes a deferred tax benefit of
approximately $13 million associated with legal entity restructuring the company undertook to integrate and simplify the
company’s business operations. The fiscal 2022 tax provision also reflects higher non-deductible stock compensation expense,
where the prior year included favorable impacts from tax rate changes, tax refunds and adjustments for the finalization of 2020
tax returns. The effective rates in 2022 and 2021 were higher than the federal tax rate of 21% primarily due to state taxes and
foreign tax rate differentials.
Termination of Welbilt Merger
As previously disclosed, 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 Condensed Consolidated Statements of Comprehensive Income 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 Condensed Consolidated Statements of Comprehensive Income.
37
Financial Condition and Liquidity
Total cash and cash equivalents increased by $85.5 million to $247.5 million at December 30, 2023 from $162.0 million at
December 31, 2022. Total debt decreased to $2.4 billion at December 30, 2023 from $2.7 billion December 31, 2022,
respectively.
OPERATING ACTIVITIES. Net cash provided by operating activities after changes in assets and liabilities amounted to
$628.8 million as compared to $332.6 million in the prior year.
During fiscal 2023, working capital changes meaningfully impacted operating cash flows primarily driven by decreased
inventory levels of $157.9 million, a decrease of $110.7 million in accrued expenses and other liabilities, including impacts
from the timing of payments and status of over-time revenue contracts, various customer programs and incentive programs and
a decrease in accounts payable of $49.4 million.
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 2023, net cash used for investing activities amounted to $155.7 million. Cash used to
fund acquisitions and investments amounted to $68.8 million. Additionally, $85.2 million was expended, primarily for upgrades
of production equipment and manufacturing facilities.
FINANCING ACTIVITIES. Net cash flows used for financing activities amounted to $390.9 million in 2023. The company’s
borrowing activities during 2023 included $308.3 million of net repayments under its Credit Facility. Additionally, the
company repurchased $74.6 million of Middleby common shares during 2023. This was comprised of $19.6 million to
repurchase 126,704 shares of Middleby common stock that were surrendered to the company for withholding taxes related to
restricted stock vestings and $55.0 million used to repurchase 397,738 shares of its common stock under a repurchase program.
At December 30, 2023, 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 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 1, 2023, 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.
38
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.
39
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.
As a result of the financial performance indicators for the Residential Kitchen reporting unit, the company deemed it necessary
to complete a quantitative analysis. The fair value of the reporting unit exceeded its carrying value by more than 10%, thus no
impairment of goodwill was recognized. The company believes the assumptions utilized within the quantitative analysis are
reasonable and consistent with assumptions that would be used by other marketplace participants. Such assumptions are,
however inherently uncertain, and different assumptions could lead to a different assessment for the reporting unit that could
result in a material impairment that would adversely affect our results of operations.
As a result of the qualitative assessment for the other two reporting units, 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.
40
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.
Based on the qualitative assessment as of October 1, 2023, the company identified several trademarks and trade names with
indicators of potential risk for impairment and performed quantitative assessments. 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.
The gross value of all trademarks tested was approximately $246.2 million, including the impaired trademarks. As a result of
the quantitative testing the company recognized $78.1 million of impairment charges primarily associated with the Kamado Joe,
Masterbuilt and Char-Griller trademarks. For further details associated with the company's trademarks impairment testing, see
Note 3 (f) to the Consolidated Financial Statements. The fair values of the trademarks tested with no impairment and exceeded
their carrying values by 10% or more. The company believes the assumptions utilized within the quantitative analyses are
reasonable and consistent with assumptions that would be used by other marketplace participants.
The company continues to monitor global and regional economic market conditions, channel inventory levels, and the
underlying demand for its products to assess 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.
41
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.
42
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.
43
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:
2024
2025
2026
2027
2028 and thereafter
Variable Rate
Debt
$
44,822
785,304
1,589,014
755
5,300
$ 2,425,195
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. Prior to July 1, 2023, the company amended its Credit Facility and the
existing interest rate swap agreements to transition the interest reference rate from one-month LIBOR to one-month Secured
Overnight Financing Rate ("SOFR"). There were no other changes to the company's Credit Facility or timing of cash flows. The
amendment was entered into because the LIBOR rate historically used was no longer published after June 30, 2023. The
company utilized expedients within ASC 848 to conclude that this amendment should be treated as a non-substantial
modification of the existing contract, resulting in no impact to the company's consolidated financial statements. 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 December 30, 2023, the fair value of these instruments was an asset of $42.8 million. The change
in fair value of these swap agreements in the first twelve months of 2023 was a loss of $16.5 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.
The company has Convertible Notes that were issued in August 2020, which carry a fixed annual interest rate of 1.00%. As
such, the company does not have economic interest rate exposure on the Convertible Notes. 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.
44
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
46
50
51
52
53
54
55
93
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.
45
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 December 30, 2023, 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 December 30, 2023, 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 Flavor Burst, Blue Sparq, Filtration Automation, Systems IV and Trade-Wind which are included in the 2023
consolidated financial statements of the Company and constituted 1.5% and 0.0% of total and net assets, respectively, as of
December 30, 2023 and 0.3% and 0.0% 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 Flavor Burst, Blue Sparq, Filtration Automation, Systems IV and Trade-Wind.
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 December 30, 2023 and December 31, 2022, 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 December 30, 2023, and the related notes and financial statement schedule listed in the Index at
Item 8 and our report dated February 28, 2024 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
February 28, 2024
46
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 December
30, 2023 and December 31, 2022, 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 December 30, 2023, 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 December 30, 2023 and December 31, 2022, and the results of its operations and its cash flows for each of the three years in
the period ended December 30, 2023, 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 December 30, 2023, 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 February 28, 2024, 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 Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of critical audit matters 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 matters below, providing separate opinions on the critical audit
matters or on the accounts or disclosures to which they relate.
47
Description of the
Matter
How We Addressed
the Matter in Our
Audit
Description of the
Matter
Indefinite-Lived Intangible Assets Impairment Assessments
At December 30, 2023, the Company's indefinite-lived intangible assets consist of trademarks and
tradenames with an aggregate carrying value of approximately $1.3 billion. As described in Note
3 of the consolidated financial statements, trademarks and tradenames with indefinite lives are
tested by the Company’s management for impairment at least annually, in the fiscal fourth
quarter, unless there are indications of impairment at other points throughout the year. If the fair
value of the intangible asset is less than its carrying amount, an impairment loss is recognized in
an amount equal to the difference. Management recognized non-cash indefinite-lived intangible
asset impairment losses of $78.1 million for the year ended December 30, 2023. As disclosed by
management, management utilizes the relief from royalty method to estimate the fair value of its
trademarks and tradenames.
Auditing the impairment tests of indefinite–lived intangible assets is complex due to the
significant management judgments and estimates required to determine the fair value of the
trademarks and tradenames, including assumptions related to forecasted net sales, discount rates
and royalty rates, all of which are sensitive to and affected by economic, industry and company-
specific qualitative factors.
We obtained an understanding, evaluated the design and tested the operating effectiveness of the
Company's controls over the impairment tests of indefinite-lived intangible assets. This included
evaluating controls over the Company’s process used to develop the forecasts of future net sales
and the selection of royalty rates and discount rates used in estimating the fair value of the
trademarks and tradenames with indefinite lives. We also tested controls over management’s
review of the completeness and accuracy of data used in their valuation models.
To test the estimated fair value of the Company’s trademarks and tradenames, we performed audit
procedures that included, among others, assessing the methodologies, testing the significant
assumptions discussed above and testing the completeness and accuracy of the underlying data.
We compared the significant assumptions used by management to current industry and economic
trends, the Company’s historical results and other guideline companies within the same industry
and evaluated whether changes in the Company’s business would affect the significant
assumptions. We assessed the historical accuracy of management’s estimates by comparing them
to actual operating results and performed sensitivity analyses of significant assumptions to
evaluate the change in the fair value of the trademarks and tradenames with indefinite lives
resulting from changes in these assumptions. We involved our valuation specialists to assist with
our evaluation of the methodology and auditing certain significant assumptions included in the
fair value estimates.
Goodwill Impairment Assessment
At December 30, 2023, the Company had goodwill of $2.5 billion on its consolidated balance
sheet. As discussed in Note 3 to the consolidated financial statements, goodwill is assessed for
impairment on an annual basis or more frequently if indicators of potential impairment exist. If
the fair value of the reporting units (for goodwill) is less than its respective carrying value, an
impairment loss is recognized in an amount equal to the difference.
Auditing the Company’s quantitative goodwill impairment assessment is complex because the
estimation of fair values involves complex valuation methodologies and subjective management
assumptions. These assumptions for the goodwill assessment include the net sales growth,
EBITDA margin, discount rate, and market multiples. These significant assumptions used in the
Company’s valuation model are forward looking and changes in these assumptions can have a
material effect on the determination of fair values.
48
How We Addressed
the Matter in Our
Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of the
Company’s controls over its impairment assessment for the Residential Kitchen reporting unit,
including management’s review of the methods and significant assumptions described above.
Our audit procedures to test the annual impairment assessment for the Residential Kitchen
reporting unit included, among others, assessing the valuation methodologies and assumptions
described above, and the underlying data used to support such assumptions. For example, we
compared certain assumptions to industry, market and economic trends. Where appropriate, we
evaluated whether changes to the Company’s business and other factors would affect the
assumption. We also assessed the historical accuracy of management’s estimates and performed
sensitivity analyses. We involved our valuation specialists to assist with our evaluation of the
methodology and auditing certain significant assumptions included in the fair value estimates.
/s/ Ernst & Young LLP
We have served as the Company's auditor since 2012.
Chicago, Illinois
February 28, 2024
49
THE MIDDLEBY CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 30, 2023 AND DECEMBER 31, 2022
(amounts in thousands, except share data)
2023
2022
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net of reserve for doubtful accounts of $23,464 and $20,295
Inventories, net
Prepaid expenses and other
Prepaid taxes
Total current assets
Property, plant and equipment, net of accumulated depreciation of $339,528 and $299,572
Goodwill
Other intangibles, net of amortization of $574,079 and $503,034
Long-term deferred tax assets
Pension benefits 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; 63,942,340 and 63,508,855 shares issued in 2023 and
2022, respectively
Paid-in capital
Treasury stock, at cost; 10,338,922 and 9,814,480 shares in 2023 and 2022
Retained earnings
Accumulated other comprehensive loss
Total stockholders' equity
$
247,496 $
644,576
935,867
112,690
25,230
1,965,859
510,898
2,486,310
1,693,076
7,945
38,535
204,069
162,001
631,134
1,077,729
125,640
9,492
2,005,996
443,528
2,411,834
1,794,232
6,738
—
212,538
$ 6,906,692 $ 6,874,866
$
44,822 $
227,080
579,192
851,094
2,380,373
216,143
12,128
197,065
45,583
271,374
671,327
988,284
2,676,741
220,204
14,948
176,942
—
—
148
479,216
(906,031)
3,899,754
(223,198)
147
408,376
(831,176)
3,498,872
(278,472)
3,249,889
2,797,747
Total liabilities and stockholders' equity
$ 6,906,692 $ 6,874,866
The accompanying Notes to Consolidated Financial Statements
are an integral part of these consolidated financial statements.
50
THE MIDDLEBY CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE FISCAL YEARS ENDED DECEMBER 30, 2023, DECEMBER 31, 2022
AND JANUARY 1, 2022
(amounts in thousands, except per share data)
Net sales
Cost of sales
Gross profit
Selling, general, and administrative expenses
Restructuring expenses
Impairments
Merger termination fee
Gain on sale of plant
Income from operations
Interest expense and deferred financing amortization, net
Net periodic pension benefit (other than service cost & curtailment)
Other expense (income), 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
2023
2022
$ 4,036,605 $ 4,032,853 $ 3,250,792
2,055,932
1,194,860
2,586,299
1,446,554
2,502,543
1,534,062
2021
806,946
14,134
78,114
—
—
634,868
120,348
(9,071)
4,213
519,378
118,496
400,882 $
797,234
9,716
—
—
—
639,604
88,977
(42,681)
28,893
564,415
127,846
436,569 $
667,976
7,655
—
(110,000)
(763)
629,992
57,157
(45,066)
(1,603)
619,504
131,012
488,492
7.48 $
7.41 $
8.07 $
7.95 $
8.85
8.62
53,577
509
54,086
54,095
852
54,947
55,216
1,449
56,665
$
$
$
The accompanying Notes to Consolidated Financial Statements
are an integral part of these consolidated financial statements.
51
THE MIDDLEBY CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE FISCAL YEARS ENDED DECEMBER 30, 2023, DECEMBER 31, 2022
AND JANUARY 1, 2022
(amounts in thousands)
2023
2022
2021
Net earnings
$
400,882
$
436,569
$
488,492
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 (loss) gain on certain investments, net of tax
Other comprehensive income (loss):
Comprehensive income
59,855
11,988
(16,569)
—
(107,691)
127,995
61,638
(1,330)
55,274
$
80,612
$
(47,693)
151,223
24,484
1,330
129,344
456,156
$
517,181
$
617,836
$
$
The accompanying Notes to Consolidated Financial Statements
are an integral part of these consolidated financial statements.
52
THE MIDDLEBY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE FISCAL YEARS ENDED DECEMBER 30, 2023, DECEMBER 31, 2022
AND JANUARY 1, 2022
(amounts in thousands)
Balance, January 2, 2021
Net earnings
Adoption of ASU 2020-06 (1)
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)
Balance, January 1, 2022
Net earnings
Currency translation adjustments
Change in unrecognized pension benefit costs, net of tax of
$37,475
Unrealized gain on interest rate swap, net of tax of $21,337
Unrealized loss on certain investments, net of tax of $(443)
Stock compensation
Purchase of treasury stock
Purchase of capped calls, net of tax of $(2,354)
Common
Stock
Paid-in
Capital
Treasury
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income/(loss)
Total
Stockholders'
Equity
$
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)
488,492
(74,375)
(47,693)
151,223
151,223
24,484
1,330
—
—
—
—
24,484
1,330
42,330
2,522
(29,265)
(41,421)
$
147 $ 357,309 $ (566,399) $ 3,062,303 $
(359,084) $
2,494,276
—
—
—
—
—
—
—
—
—
—
—
—
—
58,368
—
—
—
—
—
—
—
(264,777)
(7,301)
—
436,569
—
436,569
—
—
—
—
—
—
—
(107,691)
(107,691)
127,995
61,638
(1,330)
—
—
—
127,995
61,638
(1,330)
58,368
(264,777)
(7,301)
Balance, December 31, 2022
$
147 $ 408,376 $ (831,176) $ 3,498,872 $
(278,472) $
2,797,747
Net earnings
Currency translation adjustments
Change in unrecognized pension benefit costs, net of tax of
$5,993
Unrealized gain on interest rate swap, net of tax of $(5,637)
Stock compensation
Stock issuance
Purchase of treasury stock
—
—
—
—
—
1
—
—
—
—
—
51,047
19,793
—
—
—
—
—
—
—
(74,855)
400,882
—
—
—
—
—
—
—
59,855
11,988
(16,569)
—
—
—
400,882
59,855
11,988
(16,569)
51,047
19,794
(74,855)
Balance, December 30, 2023
$
148 $ 479,216 $ (906,031) $ 3,899,754 $
(223,198) $
3,249,889
(1) 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.
53
THE MIDDLEBY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED DECEMBER 30, 2023, DECEMBER 31, 2022
AND JANUARY 1, 2022
(amounts in thousands)
Cash flows from operating activities—
Net earnings
Adjustments to reconcile net earnings to net cash provided by operating activities
2023
2022
2021
$
400,882 $
436,569 $
488,492
Depreciation and amortization
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
Other non-cash items
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
Premiums paid for capped call
Net (repayments) proceeds under foreign bank loan
Payments of deferred purchase price
Repurchase of treasury stock
Debt issuance costs
Other, net
Net cash (used in) provided by financing activities
Effect of exchange rates on cash and cash equivalents
Changes in cash and cash equivalents—
Net increase (decrease) 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:
132,604
51,047
(2,405)
(9,071)
—
78,114
—
1,529
(4,624)
157,868
(17,081)
(49,369)
(110,704)
628,790
—
(1,805)
(68,758)
138,061
58,368
(6,642)
(42,681)
—
—
—
125,243
42,330
6,863
(45,066)
(763)
—
1,924
(12,127)
(11,805)
(28,392)
(196,313)
(5,201)
(47,742)
38,652
332,552
—
(2,233)
(93,988)
(198,264)
10,853
61,336
36,244
423,399
(46,551)
6,290
(5,000)
(85,179)
(67,289)
(278,797)
(963,600)
(155,742)
(348,319)
(1,008,861)
640,200
1,870,000
1,739,101
(948,496)
(1,555,250)
(1,135,058)
—
(166)
(7,701)
(74,565)
—
(211)
(390,939)
3,386
(9,655)
(24,470)
(7,930)
(264,777)
—
(287)
7,631
(10,225)
85,495
(18,361)
162,001
247,496 $
180,362
162,001 $
$
(54,553)
(2,030)
(5,861)
(29,265)
(9,242)
(303)
502,789
(5,068)
(87,741)
268,103
180,362
Stock issuance related to acquisition and purchase of intangible assets
19,794
—
2,522
The accompanying Notes to Consolidated Financial Statements
are an integral part of these consolidated financial statements.
54
THE MIDDLEBY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEARS ENDED DECEMBER 30, 2023, DECEMBER 31, 2022
AND JANUARY 1, 2022
(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 forty-
four U.S. and thirty-five 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, IoT solutions and controls
development and manufacturing.
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, 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, automated
washing systems, auto-guided vehicles, 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.
55
(2) ACQUISITIONS AND PURCHASE ACCOUNTING
The following represents the company's significant acquisitions in 2023 and 2022, 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.
2022 Acquisitions
During 2022, the company completed various acquisitions that were not individually material. The final allocation of
consideration paid for the other 2022 acquisitions is summarized as follows (in thousands):
Cash
Current assets
Property, plant and equipment
Goodwill
Other intangibles
Long-term deferred tax asset
Other assets
Current portion of long-term debt
Current liabilities
Long term debt
Long-term deferred tax liability
Other non-current liabilities
Preliminary
Opening Balance
Sheet
Measurement
Period
Adjustments
Adjusted Opening
Balance Sheet
$
25,860 $
159 $
115,264
44,598
139,633
93,147
426
1,420
(22,841)
(57,158)
(5,646)
(23,137)
(19,061)
(8,911)
615
11,358
7,018
635
3,414
2,043
(4,029)
(3,995)
2,049
(8,019)
26,019
106,353
45,213
150,991
100,165
1,061
4,834
(20,798)
(61,187)
(9,641)
(21,088)
(27,080)
Consideration paid at closing
$
292,505 $
2,337 $
294,842
Deferred payments
Contingent consideration
—
19,105
1,970
3,969
1,970
23,074
Net assets acquired and liabilities assumed
$
311,610 $
8,276 $
319,886
The net long-term deferred tax liability amounted to $20.0 million. The net deferred tax liability is comprised of $20.8 million
related to the difference between the book and tax basis of identifiable intangible assets and $0.8 million net deferred tax asset
related to the difference between the book and tax basis on identifiable tangible asset and liability accounts.
56
The goodwill and $46.0 million of other intangibles associated with the trade names are subject to the non-amortization
provisions of ASC 350. Other intangibles also include $31.5 million allocated to customer relationships, $16.0 million allocated
to developed technology, and $6.7 million allocated to backlog, which are being amortized over periods of 7 to 9 years, 5 to 11
years, and 3 to 12 months, respectively. Goodwill of $113.8 million and other intangibles of $63.8 million are allocated to the
Food Processing Equipment Group for segment reporting purposes. Goodwill of $34.9 million and other intangibles of $35.6
million are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. Goodwill of $2.3
million and other intangibles of $0.8 million are allocated to the Residential Kitchen Equipment Group for segment reporting
purposes. Of these assets, goodwill of $21.5 million and intangibles of $11.9 million are expected to be deductible for tax
purposes.
Several purchase agreements include deferred payment and earnout provisions providing for a contingent payment due to the
sellers for the achievement of certain targets. The deferred payments are payable between 2023 and 2024. The contractual
obligations associated with the deferred payments on the acquisition date amounts to $2.0 million.Three earnouts are payable to
the extent certain EBITDA targets are met with measurement dates ending between 2022 and 2025. One of these three earnouts
is also payable yearly through 2027 based on product sales. One earnout is payable yearly through 2028 based on product sales.
The contractual obligation associated with the contingent earnout provisions recognized on the acquisition date amount to $23.1
million.
2023 Acquisitions
During 2023, 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 2023 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
$
3,102 $
— $
9,964
21,954
38,422
34,337
—
(3,774)
(958)
(12,099)
188
(39)
2,726
(722)
5
(1,147)
16
(216)
3,102
10,152
21,915
41,148
33,615
5
(4,921)
(942)
(12,315)
Consideration paid at closing
$
90,948 $
811 $
91,759
Contingent consideration
14,743
216
14,959
Net assets acquired and liabilities assumed
$
105,691 $
1,027 $
106,718
The net long-term deferred tax liability amounted to $0.9 million. The net deferred tax liability is comprised of $0.3 million
related to the difference between the book and tax basis of identifiable intangible assets and $0.6 million related to the
difference between the book and tax basis on identifiable tangible asset and liability accounts.
57
The goodwill and $17.9 million of other intangibles associated with the trade names are subject to the non-amortization
provisions of ASC 350. Other intangibles also include $7.2 million allocated to customer relationships, $7.9 million allocated to
developed technology, and $0.6 million allocated to backlog, which are being amortized over periods of 7 years, 7 to 12 years,
and 9 months, respectively. Goodwill of $17.9 million and other intangibles of $7.8 million are allocated to the Food Processing
Equipment Group for segment reporting purposes. Goodwill of $9.6 million and other intangibles of $14.1 million are allocated
to the Commercial Foodservice Equipment Group for segment reporting purposes. Goodwill of $13.6 million and other
intangibles of $11.7 million are allocated to the Residential Kitchen Equipment Group for segment reporting purposes. Of these
assets, goodwill of $39.5 million and intangibles of $32.2 million are expected to be deductible for tax purposes.
Four purchase agreements include earnout provisions providing for a contingent payment due to the sellers for the achievement
of certain targets. Four earnouts are payable to the extent certain sales and EBITDA targets are met with measurement dates
ending between 2024 and 2026. One earnout is payable upon the achievement of certain product rollout targets specific to the
year of measurement. The contractual obligation associated with the contingent earnout provisions recognized on the
acquisition date amount to $15.0 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 2023. Certain intangible assets are preliminarily valued using historical information from
the Commercial Foodservice Equipment Group, Food Processing Equipment Group, and Residential Kitchen 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.
58
Pro Forma Financial Information
In accordance with ASC 805 Business Combinations, the following unaudited pro forma results of operations for the twelve
months ended December 30, 2023 and December 31, 2022, assumes the 2022 and 2023 acquisitions described above were
completed on January 2, 2022 (first day of fiscal year 2022). 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):
Twelve Months Ended
Net sales
Net earnings
Net earnings per share:
Basic
Diluted
December 30, 2023
$
4,046,332 $
403,484
December 31, 2022
4,160,826
426,167
$
$
7.53 $
7.46 $
7.88
7.76
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 2023, 2022, and 2021 ended on
December 30, 2023, December 31, 2022 and January 1, 2022, respectively, with each year including 52 weeks.
Certain prior year amounts have been reclassified to be consistent with current year presentation.
(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.
59
(c)
Accounts Receivable
Accounts receivable, as shown in the consolidated balance sheets, are net of allowances for doubtful accounts of $23.5 million
and $20.3 million at December 30, 2023 and December 31, 2022, respectively. At December 30, 2023, all accounts receivable
are expected to be collected within one year.
(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 December 30, 2023 and December 31,
2022 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
2022
2023
595,325
495,488 $
86,083
80,102
360,277
396,321
935,867 $ 1,077,729
2023
2022
73,060 $
346,527
69,438
361,401
850,426
(339,528)
510,898 $
65,794
306,004
59,438
311,864
743,100
(299,572)
443,528
$
$
$
$
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 $50.4 million, $44.2 million and $42.7 million in fiscal 2023, 2022 and 2021, 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.
60
(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 1, 2023 over all three reporting units. As a result of the
financial performance for the Residential Kitchen reporting unit, the company completed a quantitative analysis. The primary
indicator of impairment was market conditions resulting in lower than expected revenue performance in the current year and
forecasted revenues for future periods. The fair value of the reporting unit exceeded its carrying unit by more than 10% and no
impairment of goodwill was recognized. The company believes the assumptions utilized within the qualitative analysis are
reasonable and consistent with assumptions that would be used by other marketplace participants.
Based on the qualitative assessment for all other reporting units it was determined there was no impairment of goodwill. 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 January 1, 2022
Commercial
Foodservice
Food
Processing
Residential
Kitchen
Total
$ 1,298,369 $ 237,433 $ 707,667 $ 2,243,469
Goodwill acquired during the year
30,107
112,254
2,266
144,627
Measurement period adjustments to goodwill acquired in prior year
Exchange effect
923
(19,623)
—
616
75,344
(33,522)
76,267
(52,529)
Balance as of December 31, 2022
$ 1,309,776 $ 350,303 $ 751,755 $ 2,411,834
Goodwill acquired during the year
Measurement period adjustments to goodwill acquired in prior year
Exchange effect
9,640
4,825
4,815
17,922
13,586
1,540
5,452
16,696
41,148
6,365
26,963
Balance as of December 30, 2023
$ 1,329,056 $ 375,217 $ 782,037 $ 2,486,310
61
Intangible assets consist of the following (in thousands):
December 30, 2023
December 31, 2022
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
7.0
0.0
8.3
$ 845,326 $
—
98,593
$ 943,919 $
(529,533)
—
(44,546)
(574,079)
7.6
0.1
8.3
$ 839,811 $
8,301
79,763
$ 927,875 $
(460,885)
(6,352)
(35,797)
(503,034)
$ 1,323,236
$ 1,369,391
The company completed its annual impairment assessment for indefinite-lived intangible assets as of October 1, 2023. We
identified indicators of impairment with certain trademarks within the each of its reporting units based on the qualitative
assessment. The primary indicator of impairment was market conditions resulting in lower than expected revenue performance
in the current year and forecasted revenues for future periods.
Based on the results of the quantitative assessments, the company recorded impairment charges of $78.1 million associated with
several trademarks, of which $76.1 million was associated with the Residential Kitchen Equipment Group and $2.0 million with
the Commercial Foodservice Equipment Group. The gross value of all trademarks tested was approximately $246.2 million,
including the impaired trademarks. The fair values of the other trademarks tested with no impairment per the analyses,
exceeded their carrying values by 10% or more.
The Kamado Joe, Masterbuilt and Char-Griller trademarks within the Residential Kitchen Equipment Group were impaired
based on the quantitative assessments. The fair value of trademarks were estimated to be $122.3 million as compared to the
carrying value of $198.4 million and resulted in a $76.1 million indefinite-lived intangible asset impairment charge. The
diminution in fair value for the trademarks was macroeconomic conditions such as higher inventory levels in the channel
following periods of disruption in supply chain and inflationary pressures on the carrying costs of inventory levels in the retail
industry. This led to lower than expected revenue in the current year and corresponding reductions of future revenue due to
expectations for recovery in demand. The company estimated the fair value of the trademarks using a relief from royalty
method under the income approach. In performing the quantitative analyses on these trademark, significant assumptions include
revenue growth rates, assumed royalty rates and the discount rate. The company believes the assumptions utilized within the
quantitative analysis are reasonable and consistent with assumptions that would be used by other marketplace participants.
Collectively, for the Kamado Joe, Masterbuilt and Char-Griller trademarks, a 10.0% reduction in revenues would result in an
impairment charge of approximately $11.3 million. A 50 basis point reduction of the royalty rates would result in an
impairment charge of approximately $13.4 million. A 50 basis point increase in the discount rates would result in an
impairment charge of approximately $7.5 million.
The company performed a qualitative assessment as of October 1, 2023 for all other trademarks and trade names and
determined it is more like than not that the fair value of its other indefinite-life intangible assets are greater than the carrying
amounts.
The company elected to perform a qualitative assessment on the other indefinite-life intangible assets noting no events that
indicated that the fair value was less than the carrying value that would require a quantitative impairment assessment.
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 global and regional economic market
conditions, channel inventory levels, and the underlying demand for its products to assess 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.
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."
62
The aggregate intangible amortization expense was $75.0 million, $86.3 million and $75.8 million in 2023, 2022 and 2021,
respectively. The estimated future amortization expense of intangible assets is as follows (in thousands):
2024
2025
2026
2027
2028
2029 and thereafter
(g)
Accrued Expenses
$
$
63,606
57,400
54,208
45,687
39,380
109,559
369,840
Accrued expenses consist of the following at December 30, 2023 and December 31, 2022, 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 contingent consideration
Accrued agent commission
Accrued product liability and workers compensation
Other accrued expenses
$
2023
118,681 $
121,514
89,039
59,267
26,417
24,568
18,461
17,791
16,956
11,169
75,329
2022
185,824
122,861
82,096
70,706
25,250
24,044
19,541
20,529
17,381
11,326
91,769
$
579,192 $
671,327
(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.
63
(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 $3,998 and $(1,995)
Unrealized gain on interest rate swap, net of tax of $11,198 and $16,836
Currency translation adjustments
$
2023
(109,713) $
32,005
(145,490)
2022
(121,701)
48,574
(205,345)
$
(223,198) $
(278,472)
Changes in accumulated other comprehensive income (loss) (1) were as follows (in thousands):
Balance as of January 1, 2022
Other comprehensive income before
reclassification
Amounts reclassified from accumulated other
comprehensive income
Net current-period other comprehensive
income
Balance as of December 31, 2022
Other comprehensive income before
reclassification
Amounts reclassified from accumulated other
comprehensive income
Net current-period other comprehensive
income
Balance as of December 30, 2023
Currency
Translation
Adjustment
Pension
Benefit Costs
Unrealized
Gain/(Loss)
Interest
Rate Swap
Unrealized
Loss
Certain
Investments
Total
$
(97,654) $
(249,696) $
(13,064)
1,330 $
(359,084)
(107,691)
117,840
58,135
(1,330)
66,954
—
10,155
3,503
—
13,658
(107,691) $
127,995 $
61,638
(1,330) $
80,612
(205,345) $
(121,701) $
48,574 $
— $
(278,472)
59,855
11,392
15,652
—
596
(32,221)
—
—
86,899
(31,625)
59,855 $
11,988 $
(16,569) $
— $
55,274
(145,490) $
(109,713) $
32,005 $
— $
(223,198)
$
$
$
$
(1) As of December 30, 2023 pension and unrealized gain/(loss) interest rate swap amounts are net of tax of $4.0 million, and
$11.2 million, respectively. During the twelve months ended December 30, 2023, the adjustments to pension benefit costs and unrealized
gain/(loss) interest rate swap were net of tax of $6.0 million and $(5.6) million, respectively.
64
(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, which 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
December 30, 2023 and December 31, 2022 are as follows (in thousands):
As of December 30, 2023
Financial Assets:
Interest rate swaps
Foreign exchange derivative contracts
Financial Liabilities:
Contingent consideration
As of December 31, 2022
Financial Assets:
Interest rate swaps
Financial Liabilities:
Contingent consideration
Foreign exchange derivative contracts
Fair Value
Level 1
Fair Value
Level 2
Fair Value
Level 3
Total
$
$
$
$
$
$
— $
— $
42,779 $
29 $
— $
— $
42,779
29
— $
— $
51,538 $
51,538
— $
64,985 $
— $
64,985
— $
— $
— $
474 $
47,242 $
— $
47,242
474
The contingent consideration, as of December 30, 2023 and December 31, 2022, 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. Discount rates for valuing
contingent consideration are determined based on the company rates and specific acquisition risk considerations. Changes in
fair value associated with the earnout provisions are recognized in Selling, general and administrative expenses within the
Consolidated Statements of Earnings.
The following table represents changes in the fair value of the contingent consideration liabilities for the fiscal years 2023 and
2022:
Beginning balance
Payments of contingent consideration
New contingent consideration
Changes in fair value
Ending balance
December 30, 2023
December 31, 2022
47,242
(6,871)
15,534
(4,367)
51,538
$
$
34,983
(5,103)
22,299
(4,937)
47,242
$
$
65
(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 loss of $8.7 million, loss of $28.1 million and a gain of $0.3
million in 2023, 2022 and 2021, 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.
(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 2023 and 2022 are as follows (in thousands):
Beginning balance
Warranty reserve related to acquisitions
Warranty expense
Warranty claims paid
Ending balance
(n)
Research and Development Costs
2023
2022
$
$
82,096 $
595
89,122
(82,774)
89,039 $
80,215
3,607
70,774
(72,500)
82,096
Research and development costs, included in cost of sales in the consolidated statements of earnings, are charged to expense
when incurred. These costs were $53.1 million, $48.9 million and $41.8 million in fiscal 2023, 2022 and 2021, 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 units 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.
66
(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 amounted to 509,000, 852,000 and 1,449,000 for fiscal 2023, 2022 and 2021,
respectively. The company's potentially dilutive securities consist of shares issuable on vesting of restricted stock units
computed using the treasury method and amounted to approximately 67,000, 73,000 and 56,000 for fiscal 2023, 2022 and 2021,
respectively. During fiscal 2023 2022 and 2021, the average market price of the company's common stock exceeded the
exercise price of the Convertible Notes (as defined below) resulting in approximately 442,000, 779,000 and 1,393,000 diluted
common stock equivalents to be included in the diluted net earnings per share, respectively. There have been no material
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 2023,
2022 or 2021.
(q)
Consolidated Statements of Cash Flows
Cash paid for interest was $119.2 million, $77.2 million and $50.6 million in fiscal 2023, 2022 and 2021, respectively. Cash
payments totaling $139.7 million, $114.0 million, and $125.8 million were made for income taxes during fiscal 2023, 2022 and
2021, respectively.
(r)
New Accounting Pronouncements
Accounting Pronouncements - Recently Adopted
In March 2020, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU")
2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In
January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which amends ASU 2020-04 and
clarifies the scope and guidance of Topic 848 to allow for derivatives impacted by the rate reform to qualify for certain optional
expedients and exceptions for contract modifications and hedge accounting. The guidance is optional and is effective for a
limited period of time. In December 2022, the FASB also issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral
of the Sunset Date of Topic 848, to defer the sunset date of ASC 848 from December 31, 2022, to December 31, 2024. These
new standards were effective upon issuance and generally can be applied to applicable contract modifications. All of the
company's agreements previously utilizing LIBOR have transitioned to Secured Overnight Financing Rate ("SOFR") on or
before July 1, 2023. These changes did not have a material impact on its Consolidated Financial Statements and disclosures.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and
Contract Liabilities from Contracts with Customers. The new accounting rules require entities to apply “Revenue from
Contracts with Customers (Topic 606)” to recognize and measure contract assets and contract liabilities in a business
combination. The new accounting rules were effective for the Company in the first quarter of 2023. The company adopted this
standard in the first quarter of 2023 and it did not have a material impact 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 as of January 1, 2023 and only impacts annual financial statement footnote disclosures. The company
adopted this standard in the first quarter of 2023 and it did not have a material impact on its Consolidated Financial Statements
and disclosures.
67
In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt
Restructurings and Vintage Disclosures. The amendments in this update eliminate the accounting guidance for troubled debt
restructurings by creditors while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors
made to borrowers experiencing financial difficulty. The amendments also require disclosure of current-period gross write-offs
by year of origination for financing receivables. The amendments in this update are effective for fiscal years beginning after
December 15, 2022, including interim periods within those fiscal years. The standard should be applied prospectively, and it
allows for a modified retrospective transition method resulting in a cumulative-effect adjustment to retained earnings in the
period of adoption. The company adopted this standard in the first quarter of 2023 and it did not have a material impact on its
Consolidated Financial Statements and disclosures.
In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer
Method. The new standard expands and clarifies the use of the portfolio layer method for fair value hedges of interest rate risk.
The new standard allows non-prepayable financial assets to also be included in a closed portfolio hedged using the portfolio
layer method. The standard is effective for fiscal years beginning after December 15, 2022, including interim periods within
those fiscal years. The new guidance on hedging multiple layers in a closed portfolio should be applied prospectively and the
guidance on the accounting for fair value basis adjustments should be applied on a modified retrospective basis. The company
adopted this standard in the first quarter of 2023 and it did not have a material impact on its Consolidated Financial Statements
and disclosures.
Accounting Pronouncements - To be adopted
In March 2023, the FASB issued Accounting Standards Update ASU 2023-01, Leases (Topic 842): Common Control
Arrangements. This ASU clarified the accounting for leasehold improvements for leases under common control. The guidance
is effective for the company beginning on January 1, 2024. The company is currently evaluating the impact the adoption of this
guidance will have on its Consolidated Financial Statements and disclosures.
In November 2023, the FASB issued Accounting Standard Update ASU 2023-07, Segment Reporting (Topic 280):
Improvements to Reportable Segment Disclosures. The amendment requires disclosure of significant segment expenses that are
regularly provided to the chief operating decision maker, as well as disclosure of the title and position of the Chief Operating
Decision Maker (“CODM”). The guidance is effective for the company beginning on January 1, 2024. Early adoption is
permitted. The company is currently evaluating the impact the adoption of this guidance will have on its Consolidated Financial
Statements and disclosures.
In December 2023, the FASB issued Accounting Standard Update ASU No. 2023-09 Income Taxes (Topic 740): Improvements
to Income Tax Disclosures, which expands the disclosures required in an entity’s income tax rate reconciliation table. This ASU
requires consistent categories and greater disaggregation of information presented in the effective tax rate reconciliation and
requires disclosure of income taxes paid both domestic and foreign jurisdictions. The guidance is effective for the company
beginning on January 1, 2025 and is required to be applied prospectively, with retrospective application to prior periods
allowed. Early adoption is permitted. The company is currently evaluating the impact the adoption of this guidance will have
on its Consolidated Financial Statements and disclosures.
(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.
68
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.
69
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 December 30, 2023
United States and Canada
Asia
Europe and Middle East
Latin America
Total
Twelve Months Ended December 31, 2022
United States and Canada
Asia
Europe and Middle East
Latin America
Total
Twelve Months Ended January 1, 2022
United States and Canada
Asia
Europe and Middle East
Latin America
Total
Contract Balances
Commercial
Foodservice
Food
Processing
Residential
Kitchen
Total
$ 1,828,416 $
479,312 $
513,333 $ 2,821,061
233,039
369,823
90,193
40,208
145,293
55,805
12,611
258,201
10,371
285,858
773,317
156,369
$ 2,521,471 $
720,618 $
794,516 $ 4,036,605
$ 1,750,986 $
426,124 $
701,909 $ 2,879,019
212,182
364,120
67,474
20,306
100,239
43,300
32,121
303,840
10,252
264,609
768,199
121,026
$ 2,394,762 $
589,969 $ 1,048,122 $ 4,032,853
$ 1,417,506 $
364,894 $
454,375 $ 2,236,775
204,380
344,242
48,244
17,693
77,702
38,846
11,154
265,508
6,248
233,227
687,452
93,338
$ 2,014,372 $
499,135 $
737,285 $ 3,250,792
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
December 30, 2023 December 31, 2022
40,438
$
185,824
$
12,495
$
47,072 $
118,681 $
15,721 $
70
During the twelve months period ended December 30, 2023, the company reclassified $29.6 million to accounts receivable
which was included in the contract asset balance at the beginning of the period. During the twelve months period ended
December 30, 2023, the company recognized revenue of $161.7 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 $121.8 million during the twelve months period ended December 30, 2023. 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 December 30, 2023.
(5)
FINANCING ARRANGEMENTS
Senior secured revolving credit line
Term loan facility
Delayed draw term loan facility
Convertible senior notes
Foreign loans
Other debt arrangement
Total debt
Less: Current maturities of long-term debt
Long-term debt
Credit Facility
2023
2022
$
(in thousands)
— $
945,913
726,563
741,501
10,531
687
2,425,195
44,822
251,805
975,785
750,000
737,918
5,917
899
2,722,324
45,583
$
2,380,373 $
2,676,741
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 11, 2022, the company borrowed $750 million against the delayed draw term facility as provided under the Credit
Agreement. The funds were used to reduce outstanding borrowings under the revolver. The delayed draw term loan amortizes
in quarterly installments due on the last day of each fiscal quarter, commencing on December 30, 2023, in an amount equal to
0.625% of the principal drawn, with the balance, plus any accrued interest payable by October 21, 2026.
As of December 30, 2023, the company had $1.7 billion of borrowings outstanding under the Credit Facility, including
$950 million outstanding under the term loan ($946 million, net of unamortized issuance fees) and $727 million outstanding
under the delayed draw term loan. The company also had $1.6 million in outstanding letters of credit as of December 30, 2023,
which reduces the borrowing availability under the Credit Facility. Remaining borrowing capacity under this facility was $2.8
billion at December 30, 2023.
71
At December 30, 2023, borrowings under the Credit Facility accrued interest at a rate of 1.625% above the daily simple or term
Secured Overnight Financing Rate (“SOFR”) per annum or 0.625% above the highest of the prime rate, the federal funds rate
plus 0.50% and one month Term SOFR 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. As of December 30, 2023, borrowings under the Credit Facility accrued interest at a
minimum of 1.625% above SOFR and the variable unused commitment fee will be at a minimum of 0.25%. Borrowings under
the Credit Facility accrue interest at a minimum of 1.625% above the daily simple SOFR or term SOFR for the applicable
interest period (each of which includes a spread adjustment of 0.10%). The average interest rate per annum, inclusive of
hedging instruments, on the debt under the Credit Facility was equal to 5.22% at the end of the period and the variable
commitment fee was equal to 0.25% per annum as of December 30, 2023.
The term loan and delayed draw term loan facilities had an average interest rate per annum, inclusive of hedging instruments, of
5.22% as of December 30, 2023.
In addition, the company has international credit facilities to fund working capital needs outside the United States. At
December 30, 2023, these foreign credit facilities amounted to $10.5 million in U.S. Dollars with a weighted average per
annum interest rate of approximately 2.31%.
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):
Dec 30, 2023
Dec 31, 2022
Carrying Value
Fair Value
Carrying Value
Fair Value
Total debt excluding convertible senior notes
$
1,683,694 $
1,687,781 $
1,984,406 $
1,989,871
The company uses floating-to-fixed interest rate swap agreements to hedge variable interest rate risk associated with the Credit
Facility. At December 30, 2023, the company had outstanding floating-to-fixed interest rate swaps totaling $155.0 million
notional amount carrying an average interest rate of 1.81% maturing in less than 12 months and $695.0 million notional amount
carrying an average interest rate of 1.66% that mature in more than 12 months but less than 50 months.
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 December 30,
2023, the company was in compliance with all covenants pursuant to its borrowing agreements.
72
Convertible Notes
The following table summarizes the outstanding principal amount and carrying value of the Convertible Notes:
Principal amounts:
Principal
Unamortized issuance costs
Net carrying amount
Dec 30, 2023
Dec 31, 2022
(in thousands)
$
$
747,499 $
(5,998)
741,501 $
747,499
(9,581)
737,918
The following table summarizes total interest expense recognized related to the Convertible Notes:
Contractual interest expense
Interest cost related to amortization of debt issuance costs
Total interest expense
Twelve Months Ended
Dec 30, 2023
Dec 31, 2022
Jan 1, 2022
$
$
7,454 $
3,583
11,037 $
7,475 $
3,587
11,062 $
7,454
3,484
10,938
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.
The estimated fair value of the Convertible Notes was $914.0 million as of December 30, 2023 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 $107.8 million as of December 30,
2023.
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%. In fiscal 2021, upon adoption of ASU 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, the equity
component was essentially reversed, increasing the liability and no longer requiring the company to recognize non-cash interest
expense associated with the amortization of the debt discount.
73
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. At December 30, 2023, none of these conditions existed.
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. Under the 2022 Capped Call
Transactions, the number of shares of common stock issuable at the conversion price of $229.00 is expected to be 3.3 million
shares. As of December 30, 2023, one Convertible Note has 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.
74
Capped Call Transactions
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. The company entered into two tranches of privately negotiated
Capped Call Transactions in December 2021 (the "2021 Capped Call Transactions") in the aggregate amount of $54.6 million.
On March 15, 2022, the company entered into an additional tranche of privately negotiated Capped Call Transactions (the
"2022 Capped Call Transactions") in the amount of $9.7 million.
The 2020, 2021, and 2022 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 2022
Capped Call Transactions have an initial cap price of $229.00 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):
2024
2025
2026
2027
2028 and thereafter
$
44,822
785,304
1,589,014
755
5,300
$
2,425,195
75
(6)
COMMON AND PREFERRED STOCK
(a)
Shares Authorized
At December 30, 2023 and December 31, 2022, 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. In May 2022, the company's Board of
Directors approved the company to repurchase an additional 2,500,000 shares of its outstanding common stock under the
current program. During 2022, the company repurchased 1,553,961 shares of its common stock under the program for $249.0
million, including applicable commissions, which represented an average price of $160.27. During 2023, the company
repurchased 397,738 shares of its common stock under the program for $55.6 million, including applicable commissions and
excise tax, which represented an average price of $139.68. As of December 30, 2023, 3,116,364 shares had been purchased
under the 2017 stock repurchase program and 1,883,636 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 2022, the company repurchased 90,243 shares of its common stock that were surrendered to the company for
withholding taxes related to restricted stock vestings for $15.8 million. During 2023, the company repurchased 126,704 shares
of its common stock that were surrendered to the company for withholding taxes related to restricted stock vestings for $19.8
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 December 30, 2023 is 987,922.
Non-cash share-based compensation of $51.0 million, $58.4 million and $42.3 million was recognized for fiscal 2023, 2022 and
2021, respectively, associated with restricted share grants and restricted stock units. The company recorded a related tax benefit
of $0.8 million, $1.3 million and less than $0.4 million in fiscal 2023, 2022 and 2021, 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
$136.13, $188.31 and $181.31 per share for restricted share grants in fiscal 2023, 2022 and 2021 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 $0.6 million, $29.1 million, $7.3 million for fiscal 2023, 2022 and 2021, respectively.
76
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 December 30, 2023 is as follows:
Nonvested shares at December 31, 2022
Granted
Vested
Forfeited
Nonvested shares at December 30, 2023
Weighted
Average
Grant-Date
Fair Value
134.43
Shares
14,356 $
2,080
(3,840)
(10,516)
136.13
188.31
114.34
2,080 $
136.13
As of December 30, 2023, there was $0.1 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 0.3
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 $147.13, $150.07 and $166.41 per share for restricted stock
units in fiscal 2023, 2022 and 2021, respectively. The approximate fair value of restricted stock units vested were $30.1 million
for fiscal 2023.
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 December 30, 2023 is as follows:
Nonvested shares at December 31, 2022
Granted
Vested
Forfeited
Nonvested shares at December 30, 2023
Weighted
Average
Grant-Date
Fair Value
157.55
Units
521,455 $
333,031
(194,690)
(8,065)
147.13
144.11
158.33
651,731 $
160.15
As of December 30, 2023, there was $70.8 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 1.76
years.
77
(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
2023
346,815 $
172,563
519,378 $
2022
383,813 $
180,602
564,415 $
2021
453,357
166,147
619,504
$
$
2023
2022
2021
67,023 $
15,934
35,539
118,496 $
62,416 $
23,892
41,538
127,846 $
120,901 $
(2,405)
118,496 $
134,488 $
(6,642)
127,846 $
84,689
24,363
21,960
131,012
124,149
6,863
131,012
$
$
$
$
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
Change in valuation allowances
Tax on unremitted earnings
Federal Refund
Internal restructuring
Other
Consolidated effective tax
(1) Net of changes in related tax attributes.
2023
2022
2021
21.0 %
21.0 %
21.0 %
3.1
0.6
0.2
—
—
0.4
—
—
(2.5)
22.8 %
3.3
0.9
0.2
—
—
0.3
—
(2.3)
(0.7)
22.7 %
3.1
0.5
0.2
(2.2)
0.4
0.4
(0.7)
—
(1.6)
21.1 %
A tax provision of $118.5 million, at an effective rate of 22.8%, was recorded for fiscal 2023 as compared to $127.8 million at
an effective rate of 22.7%, in fiscal 2022. The fiscal 2023 tax provision includes a $7.0 million tax benefit for the finalization of
the 2022 tax returns. The fiscal 2022 tax provision includes a deferred tax benefit of approximately $13 million associated with
legal entity restructuring the company undertook to integrate and simplify the company’s business operations. The effective
rates in 2023 and 2022 were higher than the federal tax rate of 21.0% primarily due to state taxes and foreign tax rate
differentials.
78
At December 30, 2023 and December 31, 2022, 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
Basis difference on affiliates
Capitalized R&D costs
Convertible debt
Net operating loss carryforwards
Other
Gross deferred tax assets
Valuation allowance
Deferred tax assets
Deferred tax liabilities:
Intangible assets
Depreciable assets
Operating lease right-of-use assets
Interest rate swaps
Pension and post-retirement benefits
Other
Deferred tax liabilities
Net deferred tax assets (liabilities)
Long-term deferred asset
Long-term deferred liability
Net deferred tax assets (liabilities)
$
$
$
2023
2022
29,135 $
1,435
27,311
22,017
20,956
22,096
12,099
39,585
15,860
12,989
22,871
226,354
(15,749)
210,605 $
26,273
1,640
26,134
21,743
17,593
19,890
14,473
19,381
25,637
12,964
14,879
200,607
(11,599)
189,008
(310,847) $
(40,036)
(21,139)
(10,927)
(9,719)
(26,135)
(306,814)
(32,267)
(19,240)
(16,836)
—
(27,317)
$
(418,803) $
(402,474)
$
(208,198) $
(213,466)
7,945
(216,143)
(208,198) $
6,738
(220,204)
(213,466)
$
The company has recorded tax reserves on undistributed foreign earnings not permanently reinvested of $12.0 million and $10
million at December 30, 2023 and December 31, 2022, 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 $757.0 million on December 30, 2023. 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 $13.0 million as of December 30, 2023.
These net operating losses are available to reduce future taxable earnings of certain domestic and foreign subsidiaries. United
States federal loss carryforwards total $9.6 million of which $3.1 million will expire through 2036 and $6.5 million have no
expiration date. State loss carryforwards total $12.5 million and expire through 2038 and international loss carryforwards total
$47.8 million that can be carried forward indefinitely. Of these carryforwards, $38.4 million are subject to full valuation
allowance.
79
As of December 30, 2023, the total amount of liability for unrecognized tax benefits related to federal, state and foreign taxes
was approximately $33.9 million (of which $33.9 million would impact the effective tax rate if recognized) plus approximately
$9.4 million of accrued interest and $7.0 million of penalties. The company recognizes interest and penalties accrued related to
unrecognized tax benefits in income tax expense. Interest recognized in fiscal years 2023, 2022 and 2021 was $1.4 million, $0.6
million and $0.9 million, respectively. Penalties recognized in fiscal years 2023, 2022 and 2021 was $0.0 million, $0.2 million
and $(1.0) million, respectively.
The following table summarizes the activity related to the unrecognized tax benefits for the fiscal years ended January 1, 2022,
December 31, 2022 and December 30, 2023 (in thousands):
Balance at January 1, 2022
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 December 31, 2022
Increases to current year tax positions
Lapse of statute of limitations
Balance as of December 30, 2023
$
36,209
2,195
534
(1,709)
(1,974)
(1,607)
$
33,648
2,126
(1,852)
$
33,922
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 $4.9 million of its remaining unrecognized tax benefits may be recognized by the end of 2024 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. 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.
80
(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 $253.1 million and
$562.5 million as of December 30, 2023 and December 31, 2022, respectively. The fair value of these forward contracts was an
unrealized gain of less than $0.1 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. Prior to
July 1, 2023, the company amended its Credit Facility and the existing interest rate swap agreements to transition the interest
reference rate from one-month LIBOR to one-month SOFR. There were no other changes to the company's Credit Facility or
timing of cash flows. The amendment was entered into because the LIBOR rate historically used was no longer published after
June 30, 2023. The company utilized expedients within ASC 848 to conclude that this amendment should be treated as a non-
substantial modification of the existing contract, resulting in no impact to the company's consolidated financial statements. 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 an asset of $42.8 million and an asset of
$65.0 million as of December 30, 2023 and December 31, 2022, respectively. The change in fair value of these swap
agreements in 2023 was a loss of $16.5 million, net of taxes.
A summary of the company’s interest rate swaps is as follows (in thousands):
Fair value
Fair value
Amount of gain/(loss) recognized in other
comprehensive income
Gain/(loss) reclassified from accumulated other
comprehensive income (effective portion)
Location
Dec 30, 2023
Dec 31, 2022
Twelve Months Ended
Prepaid expenses
Other assets
Other comprehensive
income
Interest expense
$
$
$
$
2,897
39,882
$
$
6,805
58,180
10,015
$
79,472
32,221
$
(3,503)
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.
81
(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 in 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 $39.6 million, $35.7 million and $31.5 million in fiscal 2023, 2022 and 2021 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
December 30, 2023
December 31, 2022
109,373 $
102,314
26,417
87,550
113,967 $
25,250
80,242
105,492
$
$
Total Lease Commitments (in thousands)
Operating Leases
2024
2025
2026
2027
2028
2029 and thereafter
Total future lease commitments
Less imputed interest
Total
$
$
29,818
25,794
22,028
16,381
12,432
19,028
125,481
11,514
113,967
82
Other Lease Information (in thousands, except lease term and discount
rate)
Twelve Months Ended
December 30, 2023
Twelve Months Ended
December 31, 2022
Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases
$
30,117
$
28,104
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
28,524
20,725
Weighted-average remaining lease terms - Operating
5.2 years
5.5 years
Weighted-average discount rate - Operating
3.6 %
2.9 %
December 30, 2023
December 31, 2022
83
(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):
2023
Net sales
Income (loss) from operations (3)
Depreciation expense (4)
Amortization expense (5)
Net capital expenditures
Total assets
Long-lived assets (6)
2022
Net sales
Income (loss) from operations (3)
Depreciation expense (4)
Amortization expense (5)
Net capital expenditures
Total assets
Long-lived assets (6)
2021
Net sales
Income (loss) from operations (3,7,8)
Depreciation expense (4)
Amortization expense (5)
Net capital expenditures
Total assets
Long-lived assets (6)
Commercial
Foodservice
Food
Processing
Residential
Kitchen
Corporate
and Other(2)
Total
$ 2,521,471 $
616,224
27,323
56,728
39,272
3,751,746
340,375
720,618 $
158,469
7,949
9,271
14,999
1,009,857
98,920
794,516 $
(12,450)
13,637
9,052
25,960
1,941,204
227,131
— $ 4,036,605
634,868
50,416
82,188
85,179
6,906,692
761,447
(127,375)
1,507
7,137
4,948
203,885
95,021
$ 2,394,762 $
548,536
24,299
54,872
28,718
3,788,245
318,457
589,969 $ 1,048,122 $
107,459
6,045
14,034
13,957
983,797
84,370
127,948
13,596
17,376
20,604
1,972,351
151,499
(144,339)
— $ 4,032,853
639,604
44,619
93,441
67,289
6,874,866
662,804
679
7,159
4,010
130,473
108,478
$ 2,014,372 $
421,717
23,742
54,461
26,022
3,520,821
291,320
499,135 $
95,818
5,673
9,696
9,596
639,061
56,207
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) 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) Includes depreciation on right of use assets.
(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) Termination fee from Welbilt merger is included in Corporate and Other.
(8) Gain on sale of plant is included in Commercial Foodservice and Residential Kitchen for 2021.
84
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:
2023
502,479 $
2022
471,375 $
2021
379,431
$
40,849
205,621
12,498
258,968
35,965
142,326
13,138
191,429
17,818
152,384
8,034
178,236
$
761,447 $
662,804 $
557,667
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.
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.
85
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):
Interest cost
Expected return on assets
Amortization of net loss
Amortization of prior service cost
Change in Benefit Obligation:
Fiscal 2023
Fiscal 2022
U.S. Plans
Non-U.S.
Plans
U.S. Plans
Non-U.S.
Plans
1,315
46,046
923
(873)
(58,766)
(1,073)
420
—
186
2,601
758
—
25,032
(74,581)
3,671
2,589
$
862 $
(9,933) $
608 $
(43,289)
Benefit obligation – beginning of year
$
27,550 $
946,153 $
36,423 $ 1,544,147
Interest on benefit obligations
Actuarial loss (gain)
Net benefit payments
Exchange effect
1,315
539
46,046
1,970
(1,745)
(59,018)
—
53,955
923
(8,060)
(1,736)
—
25,032
(409,462)
(59,682)
(153,882)
Benefit obligation – end of year
$
27,659 $
989,106 $
27,550 $
946,153
Change in Plan Assets:
Plan assets at fair value – beginning of year
$
14,998 $
943,757 $
18,289 $ 1,342,601
Company contributions
Investment gain (loss)
Benefit payments and plan expenses
Exchange effect
1,114
1,384
6,012
81,945
(1,745)
(59,018)
—
54,725
1,173
(2,728)
(1,736)
—
5,442
(207,270)
(59,682)
(137,334)
Plan assets at fair value – end of year
$
15,751 $ 1,027,421 $
14,998 $
943,757
Funded Status:
Unfunded benefit obligation
$
(11,908) $
38,315 $
(12,552) $
(2,396)
Amounts recognized in balance sheet at year end:
Accrued pension benefits
$
(11,908) $
38,315 $
(12,552) $
(2,396)
86
Fiscal 2023
Fiscal 2022
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
$
2,011
$ 103,705
$
2,402
$ 121,292
Pre-tax components recognized in other comprehensive
income for the period:
Current year actuarial gain
Actuarial loss recognized
Prior service cost recognized
Total amount recognized
$
28
$ (17,079)
$
(4,259)
$ (148,515)
(420)
—
(150)
(360)
(758)
—
(4,272)
(7,666)
$
(392)
$ (17,589)
$
(5,017)
$ (160,453)
Accumulated Benefit Obligation
$ 27,659
$ 989,081
$ 27,550
$ 946,136
Salary growth rate
Assumed discount rate
Expected return on assets
n/a
4.8 %
6.0 %
0.8 %
4.6 %
6.2 %
n/a
4.9 %
6.0 %
0.8 %
4.8 %
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
2023
2022
48 %
40
4
8
100 %
43 %
42
6
9
100 %
45 %
40
5
10
100 %
Target Allocation
Percentage of Plan Assets
2023
2022
17 %
38
32
13
—
100 %
11 %
69
5
9
6
100 %
10 %
55
19
10
6
100 %
87
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 December 30, 2023 and December 31, 2022 (in thousands):
U.S. Plans:
Asset Category
Total
Fiscal 2023
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Net Asset
Value
Total
Fiscal 2022
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Net Asset
Value
Short Term Investment Fund (a)
$
920 $
— $
920 $
771 $
— $
771
Equity Securities:
Large Cap
Mid Cap
Small Cap
International
Fixed Income:
Government/Corporate
High Yield
Other
Alternative:
Global Real Estate Investment
Trust
Commodities Contracts
2,862
373
388
3,218
4,776
1,063
705
663
783
2,862
373
388
3,218
4,776
1,063
705
663
783
—
—
—
—
—
—
—
—
—
2,818
555
329
3,002
4,973
1,041
—
602
907
2,818
555
329
3,002
4,973
1,041
—
602
907
—
—
—
—
—
—
—
—
—
Total
$ 15,751 $
14,831 $
920 $ 14,998 $
14,227 $
771
(a) Represents collective short term investment fund, composed of high-grade money market instruments with short
maturities.
88
Non-U.S. Plans:
Asset Category
Total
Fiscal 2023
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
$
64,285 $
10,175 $
25,777 $
— $
28,333
Equity Securities:
UK
International:
Developed
Emerging
Unquoted/Private Equity
Fixed Income:
Government/Corporate:
UK
International
Index Linked
Other
Real Estate:
Direct
Indirect
Hedge Fund Strategy:
Equity Long/Short
Arbitrage & Event
Directional Trading & Fixed Income
Cash & Other
Direct Sourcing
Leveraged Loans
3,665
45
89,498
20,698
282
1,738
168
—
247,618
133,279
322,408
3,222
91,993
1,768
8,361
10,731
315
162,812
913
14,475
11,049
—
2,088
—
—
37
—
—
—
—
—
—
Alternative/Other
(148,902)
1,060
—
—
—
—
—
—
—
—
91,993
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,620
87,760
20,530
282
236,569
133,279
320,320
3,222
—
1,731
8,361
10,731
315
162,812
913
14,475
(149,962)
Total
$ 1,027,421 $
26,360 $
117,770 $
— $
883,291
89
Asset Category
Total
Fiscal 2022
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
$
52,041 $
5,372 $
7,372 $
— $
39,297
Equity Securities:
UK
International:
Developed
Emerging
Unquoted/Private Equity
Fixed Income:
Government/Corporate:
UK
International
Index Linked
Other
Real Estate:
Direct
Indirect
Hedge Fund Strategy:
Equity Long/Short
Arbitrage & Event
Directional Trading & Fixed Income
Cash & Other
Direct Sourcing
Leveraged Loans
3,677
68
70,611
18,642
2,083
191,868
127,485
199,220
1,806
83,280
5,073
30,266
22,398
6,099
169,504
4,014
8,539
2,634
298
—
8,933
—
1,433
—
—
58
—
—
—
—
—
—
Alternative/Other
(52,849)
1,583
—
—
—
—
—
—
—
—
83,280
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,609
67,977
18,344
2,083
182,935
127,485
197,787
1,806
—
5,015
30,266
22,398
6,099
169,504
4,014
8,539
(54,432)
Total
$
943,757 $
20,379 $
90,652 $
— $
832,726
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.
Estimated future benefit payments under the plans are as follows (dollars in thousands):
90
2024
2025
2026
2027
2028 through 2033
$
U.S.
Plans
Non-U.S.
Plans
1,849 $
1,867
1,906
1,944
11,534
58,680
59,708
59,409
59,459
356,302
Expected contributions to the U.S. Plans and Non-U.S. Plans to be made in 2024 are $0.6 million and $5.8 million, respectively.
(b)
Defined Contribution Plans
As of December 30, 2023, 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.
91
(12)
RESTRUCTURING AND ACQUISITION INTEGRATION INITIATIVES
Residential Kitchen Equipment Group:
During fiscal years 2023 and 2022, the company initiated cost reduction initiatives related to the Residential Kitchen Equipment
Group including headcount reductions and facility consolidations. These actions resulted in expenses of $9.4 million and $5.1
million, in the twelve months ended December 30, 2023 and December 31, 2022, respectively. These actions are reflected in the
restructuring expenses in the Consolidated Statements of Earnings. The primary realization of cost savings from the
restructuring initiatives began in 2023 with expected annual savings of approximately $12.0 million. At December 30, 2023, the
restructuring obligations accrued for these initiatives are immaterial and will be substantially complete by the end of fiscal year
2024.
The restructuring expenses for the other segments of the company were not material during fiscal years 2023, 2022 and 2021.
92
THE MIDDLEBY CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE FISCAL YEARS ENDED DECEMBER 30, 2023, DECEMBER 31, 2022
AND January 1, 2022
(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-
2023
2022
2021
$
$
$
20,295 $
5,886 $
973 $
(3,690) $
23,464
18,770 $
4,311 $
776 $
(3,562) $
20,295
19,225 $
809 $
554 $
(1,818) $
18,770
(1) Amounts consist primarily of valuation allowances assumed from acquired companies.
Valuation allowance - Deferred tax assets
2023
2022
2021
Balance
Beginning
Of Period
Additions/
(Recoveries)
Charged
to Expense
Write-Offs
During the
Period
Balance
At End
Of Period
11,599 $
4,150 $
— $
15,749
10,222 $
1,377 $
— $
11,599
11,731 $
1,138 $
(2,647) $
10,222
$
$
$
93
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 December 30, 2023. 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 December 30, 2023, 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.
94
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 Flavor Burst (acquired
January 24, 2023), Blue Sparq (acquired April 3, 2023), Filtration Automation (acquired June 13, 2023), Systems IV (acquired
July 5, 2023) and Trade-Wind (acquired July 31, 2023).
These acquisitions constitute 0.0% and 1.5% of net and total assets, respectively, 0.3% of net sales and 0.0% of net income of
the consolidated financial statements of the company as of and for the year ended December 30, 2023. These acquisitions are
included in the consolidated financial statements of the company as of and for the year ended December 30, 2023. 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 December 30, 2023.
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 December 30, 2023.
The Middleby Corporation
February 28, 2024
95
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
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.
96
Item 15. Exhibits and Financial Statement Schedules
PART IV
(a)
1.
3.
Financial Statements
The financial statements listed on Page 51 are filed as part of this Form 10-K.
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*
10.7*
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, incorporated by reference to the company's Form 10-K Exhibit 4.4
for the fiscal year ended January 2, 2021, 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, 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.
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.
97
10.8*
10.9*
10.10*
10.11*
10.12*
10.13*
10.14*
10.15*
10.16*
10.17*
21
23.1
31.1
31.2
32.1
32.2
97*
101
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 the company's to Form 8-K Exhibit
10.1, 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, 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, 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.
Employment Agreement, dated as of March 10, 2022, by and among The Middleby
Corporation, Middleby Marshall Inc. and Timothy J. FitzGerald incorporated by reference
to the company's Form 8-K Exhibit 10.1, filed on March 14, 2022.
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.
Clawback Policy
Financial statements on Form 10-K for the year ended December 30, 2023, filed on
February 28, 2024, formatted in Inline 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.
104
Cover Page Interactive Data File (formatted in iXBRL) and contained in Exhibit 101).
*
See the financial statement schedule included under Item 8.
Designates management contract or compensation plan.
(c)
98
Item 16. Form 10-K Summary
None
99
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 28th day of February 2024.
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 February 28, 2024.
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
/s/ Stephen R. Scherger
Stephen R. Scherger
/s/ Tejas P. Shah
Tejas P. Shah
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
Director
Director
100
Subsidiaries of The Middleby Corporation(1)
EXHIBIT 21
Name of Subsidiary
State/Country of
Incorporation/Organization
AGA Home, Inc.
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
Blue Sparq, Inc.
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
Colussi AWS, Inc.
Colussi Ermes CH Sagl
Colussi Ermes S.r.l.
Cozzini Middleby de Mexico, S. de R.L.de C.V.
Delaware
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
Florida
Delaware
United Kingdom
United Kingdom
Oklahoma
Delaware
Italy
Spain
Delaware
California
Delaware
Delaware
Delaware
Switzerland
Italy
Mexico
Cozzini, LLC
CP Packaging, LLC
Danfotech Holdings, LLC
Danfotech Inc.
DBT Holdings LLC
Desmon S.p.A.
Escher Mixers S.r.l.
Evo America, LLC
F.R. Drake Company
Fab-Asia Inc.
Field Service Solutions
Filling Machines & Systems, Inc.
Filtration Automation, LLC
Firex S.r.l.
Flavor Burst, LLC
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
Icetro America, Inc.
Icetro Co. Ltd.
IMA Co. Ltd.
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
Kloppenberg Products, LLC
Lab2Fab, LLC
Delaware
Wisconsin
Delaware
Missouri
Delaware
Italy
Italy
Delaware
Delaware
Philippines
Arkansas
Delaware
Texas
Italy
Delaware
Poland
Poland
Delaware
Florida
Delaware
Italy
Ohio
Delaware
Australia
Australia
Hong Kong
Delaware
Peoples Republic of China
Washington
Delaware
Denmark
Delaware
California
Korea
Korea
United Kingdom
Florida
Delaware
Denmark
Spain
Italy
Germany
Netherlands
United Kingdom
United Kingdom
Delaware
Delaware
LA Cornue SAS
Levens Middleby Worldwide B.V.
Lincat Group Ltd.
Lincat Limited.
Marco Catering Equipment (Ningbo) Co. Ltd.
Marco Beverage System Limited
Marco Beverage System US Inc.
Masterbuilt II, Inc.
Masterbuilt Holdings, LLC
Masterbuilt Outdoor IP Holdings, Inc.
Maurer-Atmos Middleby GmbH
Meheen Manufacturing, Inc.
MEP FMS Holdings, LLC
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 Deuteschland GmbH
Middleby do Brasil Ltda
Middleby Espana SLU
Middleby Europe SL
Middleby Foodservice Equipment Corporation
Middleby Food Processing Europe S.r.l.
Middleby Food Service Equipment Co., Ltd
Middleby FZ, LLC
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 Middle East Trading, LLC
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 Middle East FZE
Middleby Worldwide Philippines
Middleby Worldwide, Inc.
France
Netherlands
United Kingdom
United Kingdom
China
Ireland
Washington
Delaware
Delaware
Delaware
Germany
Washington
Delaware
Delaware
Hong Kong
Canada
India
Peoples Republic of China
Delaware
Brazil
Denmark
Germany
Brazil
Spain
Spain
Peoples Republic of China
Italy
Peoples Republic of China
Dubai
United Kingdom
India
Luxembourg
Luxembourg
Delaware
Delaware
Dubai
Delaware
Delaware
Philippines
Sweden
United Kingdom
United Kingdom
Australia
Mexico
Dubai
Philippines
Florida
Middleby XME S.L.U.
MP Equipment, LLC
MWW Food Processing USA LLC
New Star International Holdings, Inc.
Newton CFV, LLC
Newton CFV, Inc.
Nieco, LLC
Northland Corporation
Pacproinc, LLC
Novy GmbH
Novy Invest NV
Novy Ltd
Novy Nederland BV
Novy NV
Novy SAS
Pengyuan Technology (Shenzhen) Co, LTD.
Pitco Frialator, LLC
Premier Specialty Brands, LLC
Proxaut S.r.l.
Powerhouse Dynamics, LLC
QualServ Solutions LLC
Scanico A/S
SD Group Intressenter (SDGI)
Spenuzza, Inc.
Spooner Vicars Bakery Systems
Standex de Mexico S.A. de C.V.
Star International Holdings, Inc.
Star Manufacturing International Inc.
Steel Union S.r.l.
Stewart Systems Baking, LLC
Sveba Dahlen Rus. Ltd.
Sveba-Dahlen Aktiebolag
Sveba Dahlen Baltic OÜ
Sveba-Dahlen España
Sveba-Dahlen Group AB
Systems IV, Inc.
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
Trade-Wind Manufacturing, LLC
TurboChef Technologies, LLC
Spain
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Michigan
Delaware
Germany
Belgium
United Kingdom
Netherlands
Belgium
Belgium
Peoples Republic of China
Delaware
Delaware
Italy
Delaware
Delaware
Denmark
Sweden
California
United Kingdom
Mexico
Delaware
Delaware
Italy
Delaware
Russia
Sweden
Estonia
Spain
Sweden
California
Italy
Delaware
China
Mississippi
Mississippi
United Kingdom
Luxembourg
Luxembourg
United Kingdom
Arizona
Delaware
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
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 February 28, 2024, with respect to
the consolidated financial statements and schedule listed in the Index at Item 8 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 December 30, 2023.
/s/ Ernst & Young LLP
Chicago, Illinois
February 28, 2024
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: February 28, 2024
/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: February 28, 2024
/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
December 30, 2023 of the Registrant (the “Report”), that:
(1)
(2)
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.
Date: February 28, 2024
/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
December 30, 2023 of the Registrant (the “Report”), that:
(1)
(2)
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.
Date: February 28, 2024
/s/ Bryan E. Mittelman
Bryan E. Mittelman
EXHIBIT 97
Introduction
Clawback Policy
The Board of Directors (the “Board”) of The Middleby Corporation (the “Company”) believes that it is in the best interests of
the Company and its shareholders to create and maintain a culture that emphasizes integrity and accountability and that
reinforces the Company’s pay-for-performance compensation philosophy. The Board has therefore adopted this policy which
provides for the recoupment of certain executive compensation in the event of an accounting restatement resulting from
material noncompliance with financial reporting requirements under the federal securities laws (the “Policy”). This Policy is
designed to comply with Section 10D of the Securities Exchange Act of 1934 (the “Exchange Act”).
Administration
This Policy shall be administered by the Board or, if so designated by the Board, the Compensation Committee, in which case
references herein to the Board shall be deemed references to the Compensation Committee. Any determinations made by the
Board shall be final and binding on all affected individuals.
Covered Executives
This Policy applies to the Company’s current and former executive officers, as determined by the Board in accordance with
Section 10D of the Exchange Act and the listing standards of the national securities exchange on which the Company’s
securities are listed, and such other senior executives who may from time to time be deemed subject to the Policy by the Board
(“Covered Executives”).
Recoupment; Accounting Restatement
In the event the Company is required to prepare an accounting restatement of its financial statements due to the Company’s
material noncompliance with any financial reporting requirement under the securities laws, the Board will require
reimbursement or forfeiture of any excess Incentive Compensation received by any Covered Executive during the three (3)
completed fiscal years immediately preceding the date on which the Company is required to prepare an accounting restatement.
Incentive Compensation
For purposes of this Policy, Incentive Compensation means any of the following; provided that, such compensation is granted,
earned, or vested based wholly or in part on the attainment of a financial reporting measure:
a. Annual bonuses and other short- and long-term cash incentives
b. Stock options
c. Stock appreciation rights
d. Restricted stock
e. Restricted stock units
f.
g. Performance units
Performance shares
Excess Incentive Compensation: Amount Subject to Recovery
The amount to be recovered will be the excess of the Incentive Compensation paid to the Covered Executive based on the
erroneous data over the Incentive Compensation that would have been paid to the Covered Executive had it been based on the
restated results, as determined by the Board.
If the Board cannot determine the amount of excess Incentive Compensation received by the Covered Executive directly from
the information in the accounting restatement, then it will make its determination based on a reasonable estimate of the effect of
the accounting restatement.
Method of Recoupment
The Board will determine, in its sole discretion, the method for recouping Incentive Compensation hereunder which may
include, without limitation:
a.
requiring reimbursement of cash Incentive Compensation previously paid;
a.
a.
a.
a.
seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer, or other disposition of any
equity-based awards;
offsetting the recouped amount from any compensation otherwise owed by the Company to the Covered Executive;
cancelling outstanding vested or unvested equity awards; and/or
taking any other remedial and recovery action permitted by law, as determined by the Board.
No Indemnification
The Company shall not indemnify any Covered Executives against the loss of any incorrectly awarded Incentive Compensation.
Interpretation
The Board is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate, or advisable
for the administration of this Policy. It is intended that this Policy be interpreted in a manner that is consistent with the
requirements of Section 10D of the Exchange Act and any applicable rules or standards adopted by the Securities and Exchange
Commission or any national securities exchange on which the Company’s securities are listed.
Effective Date
This Policy shall be effective as of the date it is adopted by the Board (the “Effective Date”) and shall apply to Incentive
Compensation that is approved, awarded or granted to Covered Executives on or after that date, and shall apply to any Incentive
Compensation that previously was approved, awarded or granted to Covered Executives that was made subject to any
recoupment or other similar policies adopted by the Board from time to time.
Amendment; Termination
The Board may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary to reflect
final regulations adopted by the Securities and Exchange Commission under Section 10D of the Exchange Act and to comply
with any rules or standards adopted by a national securities exchange on which the Company’s securities are listed. The Board
may terminate this Policy at any time.
Other Recoupment Rights
The Board intends that this Policy will be applied to the fullest extent of the law. The Board may require that any employment
agreement, equity award agreement, or similar agreement entered into on or after the Effective Date shall, as a condition to the
grant of any benefit thereunder, require a Covered Executive to agree to abide by the terms of this Policy. Any right of
recoupment under this Policy is in addition to, and not in lieu of, any other remedies or rights of recoupment that may be
available to the Company pursuant to the terms of any similar policy in any employment agreement, equity award agreement, or
similar agreement and any other legal remedies available to the Company.
Impracticability
The Board shall recover any excess Incentive Compensation in accordance with this Policy unless such recovery would be
impracticable, as determined by the Board in accordance with Rule 10D-1 of the Exchange Act and the listing standards of the
national securities exchange on which the Company’s securities are listed.
Successors
This Policy shall be binding and enforceable against all Covered Executives and their beneficiaries, heirs, executors,
administrators or other legal representatives.
[This page intentionally left blank]
COMMERCIAL FOODSERVICE EQUIPMENT
COOKING AND FOOD PREPARATION
BEVERAGE AND ICE
AUTOMATION AND IoT
FOOD PROCESSING
RESIDENTIAL KITCHEN
CORPORATE INFORMATION
BOARD OF DIRECTORS
EXECUTIVE OFFICERS
CORPORATE HEADQUARTERS
Gordon O’Brien 4, 7
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
Brittany C. Cerwin
Chief Accounting Officer
Matthew R. Fuchsen
Chief Development Officer
James K. Pool III
Chief Technology and
Operations Officer
Steven P. Spittle
Chief Commercial Officer
TRANSFER AGENT AND REGISTRAR
Robert Nerbonne 6
Retired, Executive Vice President
Cooper-Atkins, Corporation
Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02021
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
Stephen Scherger 2, 4
Executive Vice President and
Chief Financial Officer
Graphic Packaging Holding Co.
Tejas Shah 2
Global CIO
Fluence Energy
Nassem Ziyad 2
Executive Chairman
Ziyad Brothers Importing
STOCK PRICE PERFORMANCE
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
7 Non-executive Chairman of the Board
1400 Toastmaster Drive
Elgin, Illinois 60120
www.middleby.com
www.middlebyresidential.com
www.middprocessing.com
2023
A N N U A L R E P O R T
T H I S
I S M I D D L E B Y