UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~October 1, 2022~~September 30, 2023


☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File No. 1-9973

THE MIDDLEBY CORPORATION

(Exact name of registrant as specified in its charter)


Delaware			36-3352497
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification Number)


1400 Toastmaster Drive,	Elgin,	Illinois	60120
(Address of principal executive offices)			(Zip Code)


Registrant's telephone number, including area code:			(847)			741-3300

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

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 x No o

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 the definitions of “accelerated filer," "large accelerated filer," "smaller reporting company," and "emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock	MIDD	Nasdaq Global Select Market

As of November ~~4, 2022,~~6, 2023, there were ~~53,883,522~~53,603,195 shares of the registrant's common stock outstanding.

THE MIDDLEBY CORPORATION

QUARTER ENDED ~~OCTOBER 1, 2022~~SEPTEMBER 30, 2023

INDEX


DESCRIPTION		PAGE
PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (unaudited)

	CONDENSED CONSOLIDATED BALANCE SHEETS as of ~~OCTOBER 1, 2022~~SEPTEMBER 30, 2023 and ~~JANUARY 1,~~DECEMBER 31, 2022	1

	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME for the three and nine months ended SEPTEMBER 30, 2023 and OCTOBER 1, 2022 ~~and OCTOBER 2, 2021~~	2

	CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY for the three and nine months ended SEPTEMBER 30, 2023 and OCTOBER 1, 2022 ~~and OCTOBER 2, 2021~~	3

	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS for the nine months ended SEPTEMBER 30, 2023 and OCTOBER 1, 2022 ~~and OCTOBER 2, 2021~~	54

	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	65

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2723

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3631

Item 4.	Controls and Procedures	3732

PART II. OTHER INFORMATION

Item 2.	Unregistered Sales of Equity Securities ~~and~~ ,Use of Proceeds , and Issuer Purchases o f Equity Securities	3833

Item 6.	Exhibits	3934

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

THE MIDDLEBY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Data)

(Unaudited)


ASSETS	ASSETS	Oct 1, 2022		Jan 1, 2022		ASSETS	Sep 30, 2023		Dec 31, 2022
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	144,918	$	180,362	Cash and cash equivalents	$	167,189	$	162,001
Accounts receivable, net of reserve for doubtful accounts of $17,857 and $18,770		593,514		577,142
Accounts receivable, net of reserve for doubtful accounts of $23,578 and $20,295						Accounts receivable, net of reserve for doubtful accounts of $23,578 and $20,295	633,169		631,134
Inventories, net	Inventories, net	1,062,634		837,418		Inventories, net	1,015,047		1,077,729
Prepaid expenses and other	Prepaid expenses and other	121,271		92,269		Prepaid expenses and other	131,287		125,640
Prepaid taxes	Prepaid taxes	28,201		19,894		Prepaid taxes	14,165		9,492
Total current assets	Total current assets	1,950,538		1,707,085		Total current assets	1,960,857		2,005,996
Property, plant and equipment, net of accumulated depreciation of $282,942 and $266,203		423,947		380,980
Property, plant and equipment, net of accumulated depreciation of $326,916 and $299,572						Property, plant and equipment, net of accumulated depreciation of $326,916 and $299,572	498,871		443,528
Goodwill	Goodwill	2,287,420		2,243,469		Goodwill	2,452,419		2,411,834
Other intangibles, net of amortization of $489,750 and $442,208		1,781,801		1,875,377
Other intangibles, net of amortization of $559,186 and $503,034						Other intangibles, net of amortization of $559,186 and $503,034	1,775,546		1,794,232
Long-term deferred tax assets	Long-term deferred tax assets	22,340		33,194		Long-term deferred tax assets	8,877		6,738
Other assets	Other assets	205,815		143,493		Other assets	226,038		212,538
Total assets	Total assets	$	6,671,861	$	6,383,598	Total assets	$	6,922,608	$	6,874,866

LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY					LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Current maturities of long-term debt	Current maturities of long-term debt	$	44,664	$	27,293	Current maturities of long-term debt	$	44,330	$	45,583
Accounts payable	Accounts payable	261,169		304,740		Accounts payable	224,375		271,374
Accrued expenses	Accrued expenses	631,945		582,855		Accrued expenses	595,542		671,327
Total current liabilities	Total current liabilities	937,778		914,888		Total current liabilities	864,247		988,284
Long-term debt	Long-term debt	2,693,325		2,387,001		Long-term debt	2,535,896		2,676,741
Long-term deferred tax liability	Long-term deferred tax liability	220,400		186,935		Long-term deferred tax liability	214,021		220,204
Accrued pension benefits	Accrued pension benefits	154,256		219,680		Accrued pension benefits	5,420		14,948
Other non-current liabilities	Other non-current liabilities	167,559		180,818		Other non-current liabilities	207,809		176,942
Stockholders' equity:	Stockholders' equity:					Stockholders' equity:
Preferred stock, $0.01 par value; nonvoting; 2,000,000 shares authorized; none issued	Preferred stock, $0.01 par value; nonvoting; 2,000,000 shares authorized; none issued	—		—		Preferred stock, $0.01 par value; nonvoting; 2,000,000 shares authorized; none issued	—		—
Common stock, $0.01 par value; 63,508,855 and 63,666,020 shares issued in 2022 and 2021, respectively		147		147
Common stock, $0.01 par value; 63,941,790 and 63,508,855 shares issued in 2023 and 2022, respectively						Common stock, $0.01 par value; 63,941,790 and 63,508,855 shares issued in 2023 and 2022, respectively	148		147
Paid-in capital	Paid-in capital	392,659		357,309		Paid-in capital	463,475		408,376
Treasury stock, at cost; 9,625,333 and 8,170,276 shares in 2022 and 2021		(806,079)		(566,399)
Treasury stock, at cost; 10,338,764 and 9,814,480 shares in 2023 and 2022						Treasury stock, at cost; 10,338,764 and 9,814,480 shares in 2023 and 2022	(906,011)		(831,176)
Retained earnings	Retained earnings	3,365,675		3,062,303		Retained earnings	3,823,461		3,498,872
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(453,859)		(359,084)		Accumulated other comprehensive loss	(285,858)		(278,472)
Total stockholders' equity	Total stockholders' equity	2,498,543		2,494,276		Total stockholders' equity	3,095,215		2,797,747
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	6,671,861	$	6,383,598	Total liabilities and stockholders' equity	$	6,922,608	$	6,874,866

See accompanying notes

THE MIDDLEBY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands, Except Per Share Data)

(Unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		Oct 1, 2022		Oct 2, 2021		Oct 1, 2022		Oct 2, 2021			Sep 30, 2023		Oct 1, 2022		Sep 30, 2023		Oct 1, 2022
Net sales	Net sales	$	992,871	$	817,545	$	3,001,148	$	2,384,376	Net sales	$	980,651	$	992,871	$	3,028,029	$	3,001,148
Cost of sales	Cost of sales	627,639		517,918		1,944,664		1,505,149		Cost of sales	605,329		627,639		1,880,736		1,944,664
Gross profit	Gross profit	365,232		299,627		1,056,484		879,227		Gross profit	375,322		365,232		1,147,293		1,056,484
Selling, general and administrative expenses	Selling, general and administrative expenses	201,200		175,354		596,757		496,022		Selling, general and administrative expenses	196,433		201,200		615,361		596,757
Restructuring expenses	Restructuring expenses	2,327		791		8,231		2,596		Restructuring expenses	4,448		2,327		11,698		8,231
Merger termination fee		—		(110,000)		—		(110,000)
Gain on sale of plant		—		—		—		(763)

Income from operations	Income from operations	161,705		233,482		451,496		491,372		Income from operations	174,441		161,705		520,234		451,496
Interest expense and deferred financing amortization, net	Interest expense and deferred financing amortization, net	24,067		13,192		62,563		43,481		Interest expense and deferred financing amortization, net	31,080		24,067		92,071		62,563
Net periodic pension benefit (other than service costs)	Net periodic pension benefit (other than service costs)	(9,944)		(11,363)		(32,244)		(34,268)		Net periodic pension benefit (other than service costs)	(2,103)		(9,944)		(6,929)		(32,244)
Other expense (income), net		8,529		794		18,478		(1,366)
Other expense, net										Other expense, net	1,072		8,529		2,642		18,478
Earnings before income taxes	Earnings before income taxes	139,053		230,859		402,699		483,525		Earnings before income taxes	144,392		139,053		432,450		402,699
Provision for income taxes	Provision for income taxes	34,684		54,893		99,327		97,711		Provision for income taxes	35,742		34,684		107,861		99,327
Net earnings	Net earnings	$	104,369	$	175,966	$	303,372	$	385,814	Net earnings	$	108,650	$	104,369	$	324,589	$	303,372

Net earnings per share:	Net earnings per share:									Net earnings per share:
Basic	Basic	$	1.94	$	3.19	$	5.60	$	6.99	Basic	$	2.03	$	1.94	$	6.06	$	5.60
Diluted	Diluted	$	1.92	$	3.09	$	5.50	$	6.83	Diluted	$	2.01	$	1.92	$	5.99	$	5.50
Weighted average number of shares	Weighted average number of shares									Weighted average number of shares
Basic	Basic	53,867		55,232		54,190		55,225		Basic	53,588		53,867		53,569		54,190
Dilutive common stock equivalents	Dilutive common stock equivalents	517		1,707		944		1,301		Dilutive common stock equivalents	569		517		623		944
Diluted	Diluted	54,384		56,939		55,134		56,526		Diluted	54,157		54,384		54,192		55,134
Comprehensive income	Comprehensive income	$	64,883	$	163,011	$	208,597	$	372,037	Comprehensive income	$	76,504	$	64,883	$	317,203	$	208,597

See accompanying notes

THE MIDDLEBY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(amounts in thousands)

(Unaudited)

Common
Stock Paid-in
Capital Treasury
Stock Retained
Earnings Accumulated
Other
Comprehensive
Income/(loss) Total
Stockholders'
Equity
Balance, July 2, 2022 $ 147 $ 376,898 $ (806,008) $ 3,261,306 $ (414,373) $ 2,417,970
Net earnings — — — 104,369 — 104,369
Currency translation adjustments — — — — (81,774) (81,774)
Change in unrecognized pension benefit costs, net of tax of $2,775 — — — — 17,928 17,928
Unrealized gain on interest rate swap, net of tax of $8,574 — — — — 24,360 24,360
Stock compensation — 15,761 — — — 15,761
Purchase of treasury stock — — (71) — — (71)
Balance, October 1, 2022 $ 147 $ 392,659 $ (806,079) $ 3,365,675 $ (453,859) $ 2,498,543
Balance, January 1, 2022 $ 147 $ 357,309 $ (566,399) $ 3,062,303 $ (359,084) $ 2,494,276
Net earnings — — — 303,372 — 303,372
Currency translation adjustments — — — — (201,176) (201,176)
Change in unrecognized pension benefit costs, net of tax of $6,850 — — — — 44,127 44,127
Unrealized gain on interest rate swap, net of tax of $22,389 — — — — 63,604 63,604
Unrealized loss on certain investments, net of tax of $(443) — — — — (1,330) (1,330)
Stock compensation — 42,641 — — — 42,641
Purchase of treasury stock — — (239,680) — — (239,680)
Purchase of capped calls, net of tax of $(2,364) — (7,291) — — — (7,291)
Balance, October 1, 2022 $ 147 $ 392,659 $ (806,079) $ 3,365,675 $ (453,859) $ 2,498,543


	Common Stock		Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income/(loss)		Total Stockholders' Equity
Balance, July 1, 2023	$	148	$	444,290	$	(906,011)	$	3,714,811	$	(253,712)	$	2,999,526
Net earnings	—		—		—		108,650		—		108,650
Currency translation adjustments	—		—		—		—		(36,602)		(36,602)
Change in unrecognized pension benefit costs, net of tax of $367	—		—		—		—		4,436		4,436
Unrealized gain on interest rate swap, net of tax of $7	—		—		—		—		20		20

Stock compensation	—		13,175		—		—		—		13,175
Stock issuance	—		6,010		—		—		—		6,010

Balance, September 30, 2023	$	148	$	463,475	$	(906,011)	$	3,823,461	$	(285,858)	$	3,095,215

Balance, December 31, 2022	$	147	$	408,376	$	(831,176)	$	3,498,872	$	(278,472)	$	2,797,747
Net earnings	—		—		—		324,589		—		324,589
Currency translation adjustments	—		—		—		—		(4,751)		(4,751)
Change in unrecognized pension benefit costs, net of tax of $461	—		—		—		—		(544)		(544)
Unrealized loss on interest rate swap, net of tax of $(731)	—		—		—		—		(2,091)		(2,091)
Stock compensation	—		35,305		—		—		—		35,305
Stock issuance	1		19,794		—		—		—		19,795
Purchase of treasury stock	—		—		(74,835)		—		—		(74,835)
Balance, September 30, 2023	$	148	$	463,475	$	(906,011)	$	3,823,461	$	(285,858)	$	3,095,215

~~THE MIDDLEBY CORPORATION~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY~~

~~(amounts in thousands)~~

(~~Unaudited~~)

Common
Stock Paid-in
Capital Treasury
Stock Retained
Earnings Accumulated
Other
Comprehensive
Income/(loss) Total
Stockholders'
Equity
Balance, July 3, 2021 $ 147 $ 370,816 $ (539,496) $ 2,783,659 $ (489,250) $ 2,125,876
Net earnings — — — 175,966 — 175,966
Currency translation adjustments — — — — (21,881) (21,881)
Change in unrecognized pension benefit costs, net of tax of $1,296 — — — — 5,870 5,870
Unrealized gain on interest rate swap, net of tax of $1,065 — — — — 3,056 3,056
Stock compensation — 10,198 — — — 10,198
Purchase of treasury stock — — (115) — — (115)
Balance, October 2, 2021 $ 147 $ 381,014 $ (539,611) $ 2,959,625 $ (502,205) $ 2,298,970
Balance, January 2, 2021 $ 147 $ 433,308 $ (537,134) $ 2,568,756 $ (488,428) $ 1,976,649
Net earnings — — — 385,814 — 385,814
Adoption of 2020-06 (1)
— (79,430) — 5,055 — (74,375)
Currency translation adjustments — — — — (33,000) (33,000)
Change in unrecognized pension benefit costs, net of tax of $673 — — — — 3,052 3,052
Unrealized gain on interest rate swap, net of tax of $5,637 — — — — 16,171 16,171
Stock compensation — 27,136 — — — 27,136
Purchase of treasury stock — — (2,477) — — (2,477)
Balance, October 2, 2021 $ 147 $ 381,014 $ (539,611) $ 2,959,625 $ (502,205) $ 2,298,970

~~(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.


	Common Stock		Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income/(loss)		Total Stockholders' Equity
Balance, July 2, 2022	$	147	$	376,898	$	(806,008)	$	3,261,306	$	(414,373)	$	2,417,970
Net earnings	—		—		—		104,369		—		104,369
Currency translation adjustments	—		—		—		—		(81,774)		(81,774)
Change in unrecognized pension benefit costs, net of tax of $2,775	—		—		—		—		17,928		17,928
Unrealized gain on interest rate swap, net of tax of $8,574	—		—		—		—		24,360		24,360
Stock compensation	—		15,761		—		—		—		15,761

Purchase of treasury stock	—		—		(71)		—		—		(71)

Balance, October 1, 2022	$	147	$	392,659	$	(806,079)	$	3,365,675	$	(453,859)	$	2,498,543

Balance, January 1, 2022	$	147	$	357,309	$	(566,399)	$	3,062,303	$	(359,084)	$	2,494,276
Net earnings	—		—		—		303,372		—		303,372
Currency translation adjustments	—		—		—		—		(201,176)		(201,176)
Change in unrecognized pension benefit costs, net of tax of $6,850	—		—		—		—		44,127		44,127
Unrealized gain on interest rate swap, net of tax of $22,389	—		—		—		—		63,604		63,604
Unrealized loss on certain investments, net of tax of $(443)	—		—		—		—		(1,330)		(1,330)
Stock compensation	—		42,641		—		—		—		42,641

Purchase of treasury stock	—		—		(239,680)		—		—		(239,680)
Purchase of capped calls, net of tax of $(2,364)	—		(7,291)		—		—		—		(7,291)
Balance, October 1, 2022	$	147	$	392,659	$	(806,079)	$	3,365,675	$	(453,859)	$	2,498,543

See accompanying notes

THE MIDDLEBY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)


		Nine Months Ended					Nine Months Ended
		Oct 1, 2022		Oct 2, 2021			Sep 30, 2023		Oct 1, 2022
Cash flows from operating activities--	Cash flows from operating activities--					Cash flows from operating activities--
Net earnings	Net earnings	$	303,372	$	385,814	Net earnings	$	324,589	$	303,372
Adjustments to reconcile net earnings to net cash provided by operating activities--	Adjustments to reconcile net earnings to net cash provided by operating activities--					Adjustments to reconcile net earnings to net cash provided by operating activities--
Depreciation and amortization	Depreciation and amortization	106,917		90,672		Depreciation and amortization	99,058		106,917
Non-cash share-based compensation	Non-cash share-based compensation	42,641		27,136		Non-cash share-based compensation	35,305		42,641
Deferred income taxes	Deferred income taxes	17,657		(5,704)		Deferred income taxes	(6,553)		17,657
Net periodic pension benefit (other than service costs)	Net periodic pension benefit (other than service costs)	(32,244)		(34,268)		Net periodic pension benefit (other than service costs)	(6,929)		(32,244)
Gain on sale of plant		—		(763)

Other non-cash items	Other non-cash items	(32,455)		(5,632)		Other non-cash items	(684)		(32,455)
Changes in assets and liabilities, net of acquisitions	Changes in assets and liabilities, net of acquisitions					Changes in assets and liabilities, net of acquisitions
Accounts receivable, net	Accounts receivable, net	(11,174)		(94,539)		Accounts receivable, net	(430)		(11,174)
Inventories, net	Inventories, net	(214,017)		(131,707)		Inventories, net	66,973		(214,017)
Prepaid expenses and other assets	Prepaid expenses and other assets	(30,832)		11,132		Prepaid expenses and other assets	(2,481)		(30,832)
Accounts payable	Accounts payable	(47,262)		61,286		Accounts payable	(49,188)		(47,262)
Accrued expenses and other liabilities	Accrued expenses and other liabilities	70,846		42,613		Accrued expenses and other liabilities	(86,557)		70,846
Net cash provided by operating activities	Net cash provided by operating activities	173,449		346,040		Net cash provided by operating activities	373,103		173,449
Cash flows from investing activities--	Cash flows from investing activities--					Cash flows from investing activities--
Net additions to property, plant and equipment	Net additions to property, plant and equipment	(50,914)		(29,732)		Net additions to property, plant and equipment	(69,645)		(50,914)
Proceeds on sale of property, plant and equipment		—		6,062

Purchase of intangible assets	Purchase of intangible assets	(701)		—		Purchase of intangible assets	(1,805)		(701)
Acquisitions, net of cash acquired	Acquisitions, net of cash acquired	(206,253)		(389,009)		Acquisitions, net of cash acquired	(67,774)		(206,253)
Net cash used in investing activities	Net cash used in investing activities	(257,868)		(412,679)		Net cash used in investing activities	(139,224)		(257,868)
Cash flows from financing activities--	Cash flows from financing activities--					Cash flows from financing activities--
Proceeds under Credit Facility	Proceeds under Credit Facility	1,715,000		485,976		Proceeds under Credit Facility	565,200		1,715,000
Repayments under Credit Facility	Repayments under Credit Facility	(1,360,750)		(421,550)		Repayments under Credit Facility	(711,692)		(1,360,750)

Premiums paid for capped call	Premiums paid for capped call	(9,655)		—		Premiums paid for capped call	—		(9,655)
Net repayments under international credit facilities	Net repayments under international credit facilities	(24,156)		(1,473)		Net repayments under international credit facilities	(495)		(24,156)

Payments of deferred purchase price	Payments of deferred purchase price	(7,930)		(5,861)		Payments of deferred purchase price	(4,079)		(7,930)
Repurchase of treasury stock	Repurchase of treasury stock	(239,680)		(2,477)		Repurchase of treasury stock	(74,544)		(239,680)

Other, net	Other, net	(235)		(254)		Other, net	(158)		(235)

Net cash provided by financing activities		72,594		54,361
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(225,768)		72,594
Effect of exchange rates on cash and cash equivalents	Effect of exchange rates on cash and cash equivalents	(23,619)		(4,349)		Effect of exchange rates on cash and cash equivalents	(2,923)		(23,619)
Changes in cash and cash equivalents--	Changes in cash and cash equivalents--					Changes in cash and cash equivalents--
Net decrease in cash and cash equivalents		(35,444)		(16,627)
Net increase (decrease) in cash and cash equivalents						Net increase (decrease) in cash and cash equivalents	5,188		(35,444)
Cash and cash equivalents at beginning of year	Cash and cash equivalents at beginning of year	180,362		268,103		Cash and cash equivalents at beginning of year	162,001		180,362
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	144,918	$	251,476	Cash and cash equivalents at end of period	$	167,189	$	144,918

Non-cash investing and financing activities:						Non-cash investing and financing activities:
Stock issuance related to acquisition and purchase of intangible assets						Stock issuance related to acquisition and purchase of intangible assets	$	19,795	$	—

See accompanying notes

THE MIDDLEBY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~OCTOBER 1, 2022~~SEPTEMBER 30, 2023

(Unaudited)

1)Summary of Significant Accounting Policies

a)Basis of Presentation

The condensed consolidated financial statements have been prepared by The Middleby Corporation (the "company" or “Middleby”), pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The financial statements are unaudited and certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the company believes that the disclosures are adequate to make the information not misleading. These financial statements should be read in conjunction with the financial statements and related notes contained in the company's ~~2021~~2022 Form 10-K. The company’s interim results are not necessarily indicative of future full year results for the fiscal year ~~2022.~~ 2023. Certain reclassifications of prior year data have been made to conform with current year reporting.

In the opinion of management, the financial statements contain all adjustments, which are normal and recurring in nature, necessary to present fairly the financial position of the company as of ~~October 1, 2022~~September 30, 2023 and ~~January 1,~~December 31, 2022, the results of operations for the three and nine months ended September 30, 2023 and October 1, 2022, ~~and October 2, 2021,~~ cash flows for the nine months ended September 30, 2023 and October 1, 2022 ~~and October 2, 2021~~ and statement of stockholders' equity for the three and nine months ended September 30, 2023 and October 1, ~~2022 and October 2, 2021.~~

Certain prior year amounts have been reclassified to be consistent with current year presentation, including non-cash unrealized foreign exchange on non-functional currency third party debt, previously reported in changes in assets and liabilities, net of acquisitions to other non-cash items as an adjustments to reconcile net earnings to cash provided by operating activities on the Consolidated Statements of Cash Flows.2022.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses. Significant estimates and assumptions are used for, but are not limited to, allowances for doubtful accounts, reserves for excess and obsolete inventories, long-lived and intangible assets, warranty reserves, insurance reserves, income tax reserves, non-cash share-based compensation and post-retirement obligations. Actual results could differ from the company's estimates.

b)Non-Cash Share-Based Compensation

The company estimates the fair value of market-based stock awards and stock options at the time of grant and recognizes compensation cost over the vesting period of the awards and options. Non-cash share-based compensation expense was ~~$15.7~~$13.2 million and ~~$10.2~~$15.7 million for the three months period ended September 30, 2023 and October 1, 2022, ~~and October 2, 2021,~~ respectively. Non-cash share-based compensation expense was ~~$42.6~~$35.3 million and ~~$27.1~~$42.6 million for the nine months period ended September 30, 2023 and October 1, 2022, ~~and October 2, 2021,~~ respectively.

c)Income Taxes

A tax provision of $35.7 million, at an effective rate of 24.8%, was recorded during the three months period ended September 30, 2023, as compared to a $34.7 million tax provision at an effective rate of 24.9% in the prior year period. A tax provision of $107.9 million, at an effective rate of 24.9%, was recorded during the ~~three~~nine months period ended ~~October 1, 2022,~~September 30, 2023, as compared to a ~~$54.9 million tax provision at an effective rate of 23.8% in the prior year period. A tax provision of~~ $99.3 ~~million, at an effective rate of 24.7%, was recorded during the nine months period ended October 1, 2022, as compared to a $97.7~~ million tax provision at a ~~20.2%~~24.7% effective rate in the prior year period. InThe effective tax rate for the ~~three~~nine months period ended ~~July 3, 2021,~~September 30, 2023 is higher than the ~~company recorded several discrete tax benefits, including a deferred tax benefit for~~comparable year rate primarily due to an increase in the ~~enacted future~~ UK statutory income tax rate ~~change~~ from 19% in 2022 to ~~25% and tax benefits for amended U.S. tax returns. When excluding the discrete tax adjustments, the 2021 rates were approximately 24.0%.~~

~~On August 16, 2022, President Biden signed the Inflation Reduction Act ("IRA") into law. The IRA enacted~~ a ~~15% corporate minimum tax effective~~23.5% blended rate in 2023 a 1% tax on share repurchases after December 31, 2022, and created and extended certain tax-related energy incentives. We currently do not expect the tax-related provisions of the IRA to have a material impact on our financial results..

d)Fair Value Measures

Accounting Standards Codification ("ASC") 820 "Fair Value Measurements and Disclosures" defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into the following levels:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs, other than quoted prices in active markets, that are observable either directly or indirectly.

Level 3 – Unobservable inputs based the company's own assumptions.

The company’s financial assets and liabilities that are measured at fair value and are categorized using the fair value hierarchy are as follows (in thousands):


		Fair Value Level 1		Fair Value Level 2		Fair Value Level 3		Total			Fair Value Level 1		Fair Value Level 2		Fair Value Level 3		Total
As of October 1, 2022
As of September 30, 2023										As of September 30, 2023
Financial Assets:	Financial Assets:									Financial Assets:
Interest rate swaps	Interest rate swaps	$	—	$	68,003	$	—	$	68,003	Interest rate swaps	$	—	$	62,163	$	—	$	62,163

Financial Liabilities:	Financial Liabilities:									Financial Liabilities:

Contingent consideration	Contingent consideration	$	—	$	—	$	32,332	$	32,332	Contingent consideration	$	—	$	—	$	60,789	$	60,789
Foreign exchange derivative contracts	Foreign exchange derivative contracts	$	—	$	4,353	$	—	$	4,353	Foreign exchange derivative contracts	$	—	$	558	$	—	$	558

As of January 1, 2022
As of December 31, 2022										As of December 31, 2022
Financial Assets:	Financial Assets:									Financial Assets:
Interest rate swaps	Interest rate swaps	$	—	$	3,645	$	—	$	3,645	Interest rate swaps	$	—	$	64,985	$	—	$	64,985
Foreign exchange derivative contracts		$	—	$	1,095	$	—	$	1,095

Financial Liabilities:	Financial Liabilities:									Financial Liabilities:
Interest rate swaps		$	—	$	21,635	$	—	$	21,635

Contingent consideration	Contingent consideration	$	—	$	—	$	34,983	$	34,983	Contingent consideration	$	—	$	—	$	47,242	$	47,242

Foreign exchange derivative contracts										Foreign exchange derivative contracts	$	—	$	474	$	—	$	474

The contingent consideration as of ~~October 1, 2022~~September 30, 2023 and ~~January 1,~~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 agreement. On a quarterly basis, the company assesses the projected results for each ~~acquired business~~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 Condensed Consolidated Statements of Comprehensive Income.

The following table represents changes in the fair value of the contingent consideration liabilities:


	September 30, 2023
Beginning balance	$	47,242
Payments of contingent consideration	(4,117)
New contingent consideration	15,318
Changes in fair value	2,346
Ending balance	$	60,789

e) Consolidated Statements of Cash Flows

Cash paid for interest was ~~$57.0~~$93.4 million and ~~$38.5~~$57.0 million for the nine months ended September 30, 2023 and October 1, 2022, ~~and October 2, 2021,~~ respectively. Cash payments totaling ~~$84.2~~$119.4 million and ~~$98.9~~$84.2 million were made for income taxes for the nine months ended September 30, 2023 and October 1, 2022, ~~and October 2, 2021,~~ respectively.

Other non-cash items in the adjustments to reconcile net earnings to net cash provided by operating activities consists primarily of unrealized foreign exchange on non-functional currency third party debt.

f) Earnings Per Share

“Basic earnings per share” is calculated based upon the weighted average number of common shares actually outstanding, and “diluted earnings per share” is calculated based upon the weighted average number of common shares outstanding and other dilutive securities.

The company’s potentially dilutive securities consist of shares issuable on vesting of restricted stock grants computed using the treasury method and amounted to ~~23,313~~19,000 and ~~28,102~~23,000 for the three months ended September 30, 2023, and October 1, 2022, ~~and October 2, 2021,~~ respectively. The company’s potentially dilutive securities consist of shares issuable on vesting of restricted stock grants computed using the treasury method and amounted to ~~12,171~~9,000 and ~~16,342~~12,000 for the nine months ended September 30, 2023 and October 1, 2022, ~~and October 2, 2021,~~ respectively. For the nine months ended September 30, 2023 and October 1, 2022, ~~and October 2, 2021,~~ the average market price of the company's common stock exceeded the exercise price of the Convertible Notes (as defined below) resulting in ~~931,897~~614,000 and ~~1,678,501~~932,000 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 12, Financing Arrangements for further details on the Convertible Notes. There were no anti-dilutive restricted stock grants excluded from common stock equivalents in any period presented.

2) Acquisitions and Purchase Accounting

The company accounts for all business combinations using the acquisition method to record a new cost basis for the assets acquired and liabilities assumed. The difference between the purchase price and the fair value of the assets acquired and liabilities assumed has been recorded as goodwill in the financial statements. The company recognizes identifiable intangible assets, primarily trade names and customer relationships, at their fair value using a discounted cash flow model. The significant assumptions used to estimate the value of the intangible assets include revenue growth rates, projected profit margins, discount rates, royalty rates, and customer attrition rates. These significant assumptions are forward-looking and could be affected by future economic and market conditions. The results of operations are reflected in the consolidated financial statements of the company from the dates of acquisition.

~~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 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 Consolidated Statements of Comprehensive Income.

The company completed no material acquisitions during the nine months ended ~~October 1, 2022.~~

~~Novy Invest NV~~

On July 12, 2021, the company completed its acquisition of all of the capital stock of Novy Invest NV ("Novy"), a leading manufacturer of premium residential ventilation hoods and cook tops located in Belgium, for a purchase price of approximately $250.9 million, net of cash acquired. The final allocation of consideration paid for the Novy acquisition is summarized as follows (in thousands):
Preliminary Opening Balance Sheet Measurement
Period
Adjustments Adjusted Opening Balance Sheet
Cash $ 16,152 $ — $ 16,152
Current assets 23,762 234 23,996
Property, plant and equipment 17,058 4,383 21,441
Goodwill 142,741 (6,938) 135,803
Other intangibles 126,557 4,149 130,706
Other assets 26 173 199
Current liabilities (23,440) 182 (23,258)
Long-term deferred tax liability (33,918) (2,072) (35,990)
Other non-current liabilities (1,930) (111) (2,041)
Net assets acquired and liabilities assumed $ 267,008 $ — $ 267,008

The long-term deferred tax liability amounted to $36.0 million. The deferred tax liability is comprised of $32.7 million related to the difference between the book and tax basis of identifiable intangible assets and $3.3 million related to the difference between the book and tax basis on identifiable tangible asset and liability accounts.

The goodwill and $106.6 million of other intangibles associated with the trade names are subject to the non-amortization provisions of ASC 350. Other intangibles also include $24.1 million allocated to customer relationships, which is being amortized over a period of 10 years. Goodwill of $135.8 million and other intangibles of $130.7 million from this acquisition are allocated to the Residential Kitchen Equipment Group for segment reporting purposes. Goodwill and other intangibles are not expected to be deductible for tax purposes.

~~Kamado Joe and Masterbuilt~~

On December 27, 2021, the company completed its acquisition of Masterbuilt Holdings, LLC, including its residential outdoor brands ("Kamado Joe and Masterbuilt"), a leader in outdoor residential cooking located in the Atlanta, Georgia area, for a purchase price of approximately $403.6 million, net of cash acquired. The purchase price was comprised of $403.6 million in cash and 12,921 shares of Middleby common stock valued at $2.5 million. During the third quarter of 2022, the company finalized the purchase price adjustment provided for by the purchase agreement, resulting in a payment to sellers of $2.8 million.

The following estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of the acquisition date to estimate the fair values of assets acquired and liabilities assumed (in thousands):

Preliminary Opening Balance Sheet Preliminary Measurement
Period
Adjustments Adjusted Opening Balance Sheet
Cash $ 5,381 $ (70) $ 5,311
Current assets 137,826 (5,263) 132,563
Property, plant and equipment 7,773 (1,678) 6,095
Goodwill 110,052 45,511 155,563
Other intangibles 215,577 (28,677) 186,900
Other assets 2,143 (1,174) 969
Current liabilities (54,865) (6,774) (61,639)
Long-term deferred tax liability (15,907) — (15,907)
Other non-current liabilities (1,914) 946 (968)
Net assets acquired and liabilities assumed $ 406,066 $ 2,821 $ 408,887

The long-term deferred tax liability amounted to $15.9 million. The net deferred tax liability is comprised of $2.3 million of deferred tax asset related to tax loss carryforwards and $18.2 million of deferred tax liability related to the difference between the book and tax basis on identifiable tangible asset and liability accounts.

The goodwill and $145.4 million of other intangibles associated with the trade names are subject to the non-amortization provisions of ASC 350. Other intangibles also include $31.4 million allocated to customer relationships, $3.0 million allocated to developed technology, and $7.1 million allocated to backlog, which are being amortized over periods of 10 to 12 years, 11 years, and 3 to 6 months, respectively. Goodwill of $155.6 million and other intangibles of $186.9 million of the company are allocated to the Residential Kitchen Equipment Group for segment reporting purposes. Of these assets, goodwill of $54.2 million and intangibles of $186.9 million are expected to be deductible for tax purposes.

~~Other 2021 Acquisitions~~

During the year ended January 1, 2022, the company completed various acquisitions that were not individually material. The following estimated fair values of assets acquired and liabilities assumed are based on the information that was available as of the acquisition dates for the other 2021 acquisitions and are summarized as follows (in thousands):

Preliminary Opening Balance Sheet Preliminary Measurement
Period
Adjustments Adjusted Opening Balance Sheet
Cash $ 6,414 $ — $ 6,414
Current assets 76,077 477 76,554
Property, plant and equipment 19,561 (187) 19,374
Goodwill 85,270 8,485 93,755
Other intangibles 158,725 (9,193) 149,532
Other assets 2,101 31 2,132
Current liabilities (33,910) 53 (33,857)
Long-term deferred tax asset (liability) (3,010) 3,457 447
Other non-current liabilities (7,092) (3,397) (10,489)
Consideration paid at closing $ 304,136 $ (274) $ 303,862
Contingent consideration 9,404 (200) 9,204
Net assets acquired and liabilities assumed $ 313,540 $ (474) $ 313,066

The long-term deferred tax asset amounted to $0.4 million. The net deferred tax asset is comprised of $0.7 million of deferred tax asset related to tax loss carryforwards and $0.3 million of deferred tax liability related to the difference between the book and tax basis on identifiable tangible asset and liability accounts.

The goodwill and $97.1 million of other intangibles associated with the trade names are subject to the non-amortization provisions of ASC 350. Other intangibles also include $41.1 million allocated to customer relationships, $3.4 million allocated to developed technology, and $7.9 million allocated to backlog, which are being amortized over periods of 7 years, 7 years, and 3 months, respectively. Goodwill of $28.8 million and other intangibles of $89.0 million are allocated to the Residential Kitchen Equipment Group for segment reporting purposes. Goodwill of $65.0 million and other intangibles of $60.5 million are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. Of these assets, goodwill of $91.8 million and intangibles of $148.4 million are expected to be deductible for tax purposes.

One purchase agreement includes earnout provisions providing for contingent payments due to the sellers to the extent certain financial targets are exceeded and upon the achievement of product rollout targets. One earnout is payable upon the achievement of product rollout targets. The second earnout is payable during 2026 if the company exceeds certain earnings targets. The contractual obligation associated with the contingent earnout provisions recognized on the acquisition date amount to $9.2 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 these acquisitions completed during 2021. Certain intangible assets are pending external valuation and are preliminarily valued using historical information from the Residential Kitchen Equipment Group and Commercial Foodservice Equipment Group and qualitative assessments of the individual businesses at acquisition date. Specifically, the company estimated the fair values of the intangible assets based on the percentage of purchase price assigned to similar intangible assets in previous acquisitions. Thus, the provisional measurements of fair values set forth above are subject to change. The company expects to complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date.

September 30, 2023.

Other 2022 Acquisitions

~~As of October 1,~~During 2022, the company completed various acquisitions that were not individually material. The following estimated fair values of assets acquired and liabilities assumed are based on the information that was available as of the acquisition dates for the other 2022 acquisitions and are summarized as follows (in thousands):


		Preliminary Opening Balance Sheet		Preliminary Measurement Period Adjustments		Adjusted Opening Balance Sheet			Preliminary Opening Balance Sheet		Preliminary Measurement Period Adjustments		Adjusted Opening Balance Sheet
Cash	Cash	$	19,175	$	187	$	19,362	Cash	$	25,860	$	159	$	26,019

Current assets	Current assets	89,245		200		89,445		Current assets	115,264		(8,653)		106,611
Property, plant and equipment	Property, plant and equipment	39,610		(219)		39,391		Property, plant and equipment	44,598		615		45,213
Goodwill	Goodwill	91,560		2,488		94,048		Goodwill	139,633		8,945		148,578
Other intangibles	Other intangibles	66,738		2,112		68,850		Other intangibles	93,147		7,018		100,165
Long-term deferred tax asset	Long-term deferred tax asset	426		104		530		Long-term deferred tax asset	426		635		1,061
Other assets	Other assets	526		(344)		182		Other assets	1,420		3,209		4,629
Current portion of long-term debt	Current portion of long-term debt	(22,072)		2,154		(19,918)		Current portion of long-term debt	(22,841)		2,043		(20,798)
Current liabilities	Current liabilities	(42,462)		736		(41,726)		Current liabilities	(57,158)		(2,611)		(59,769)
Long term debt	Long term debt	(4,522)		(2,320)		(6,842)		Long term debt	(5,646)		(3,995)		(9,641)
Long-term deferred tax liability	Long-term deferred tax liability	(17,368)		85		(17,283)		Long-term deferred tax liability	(23,137)		1,994		(21,143)
Other non-current liabilities	Other non-current liabilities	(4,075)		(3,394)		(7,469)		Other non-current liabilities	(19,061)		(7,022)		(26,083)

Consideration paid at closing	Consideration paid at closing	$	216,781	$	1,789	$	218,570	Consideration paid at closing	$	292,505	$	2,337	$	294,842

Contingent consideration	Contingent consideration	2,990		3,394		6,384		Contingent consideration	19,105		3,969		23,074

Net assets acquired and liabilities assumed	Net assets acquired and liabilities assumed	$	219,771	$	5,183	$	224,954	Net assets acquired and liabilities assumed	$	311,610	$	6,306	$	317,916

The net long-term deferred tax liability amounted to ~~$17.3~~$20.1 million. The net deferred tax liability is comprised of ~~$15.2~~$20.9 million related to the difference between the book and tax basis of identifiable intangible assets and ~~$2.1~~$0.8 million net deferred tax asset related to the difference between the book and tax basis on identifiable tangible asset and liability accounts.

The goodwill and ~~$31.5~~$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 ~~$27.5~~$31.5 million allocated to customer relationships, ~~$3.8~~$16.0 million allocated to developed technology, and ~~$6.0~~$6.7 million allocated to backlog, which are being amortized over periods of 7 to 9 years, 5 to 1011 years, and 3 to 612 months, respectively. Goodwill of ~~$86.3~~$113.8 million and other intangibles of ~~$49.9~~$63.8 million are allocated to the Food Processing Equipment Group for segment reporting purposes. Goodwill of ~~$5.4~~$32.5 million and other intangibles of ~~$18.2~~$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 ~~$21.1~~$21.5 million and intangibles of ~~$9.7~~$11.9 million are expected to be deductible for tax purposes.

~~Two~~

Four purchase agreements include earnout provisions providing for a contingent payment due to the sellers for the achievement of certain targets. ~~One earnout is~~Three earnouts are payable ~~during 2025~~ to the extent certain EBITDA targets are ~~met. The other~~met with measurement dates ending between 2022 and 2025. One of these three earnouts is also payable yearly through 2026 based on product sales. One earnout is payable yearly through ~~2026~~2027 based on product sales. The contractual obligation associated with the contingent earnout provisions recognized on the acquisition date amount to ~~$6.4~~$23.1 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~~certain acquisitions completed during 2022. 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.

Other 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):


	Preliminary Opening Balance Sheet		Preliminary Measurement Period Adjustments		Adjusted Opening Balance Sheet
Cash	$	3,102	$	—	$	3,102

Current assets	9,964		542		10,506
Property, plant and equipment	21,954		—		21,954
Goodwill	38,422		1,089		39,511
Other intangibles	34,337		(713)		33,624



Current liabilities	(3,774)		(1,091)		(4,865)

Long-term deferred tax liability	(958)		—		(958)
Other non-current liabilities	(12,099)		—		(12,099)

Consideration paid at closing	$	90,948	$	(173)	$	90,775


Contingent consideration	14,743		—		14,743

Net assets acquired and liabilities assumed	$	105,691	$	(173)	$	105,518

The net long-term deferred tax liability amounted to $1.0 million. The net deferred tax liability is comprised of $0.4 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.

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, and $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 $8.3 million and other intangibles of $14.1 million are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. Goodwill of $13.3 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 $37.9 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 $14.7 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 and Food Processing 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.

Pro Forma Financial Information

~~The~~In accordance with ASC 805 Business Combinations, the following unaudited pro forma results of operations for the nine months ended September 30, 2023 and October 1, 2022, ~~and October 2, 2021,~~ assumes the ~~2021~~2022 and ~~2022~~2023 acquisitions described above were completed on January ~~3, 2021~~2, 2022 (first day of fiscal year ~~2021)~~2022). The following pro forma results include adjustments to reflect amortization of intangibles associated with the acquisition and the effects of adjustments made to the carrying value of certain assets (in thousands, except per share data):


		Nine Months Ended					Nine Months Ended
		October 1, 2022		October 2, 2021			September 30, 2023		October 1, 2022
Net sales	Net sales	$	3,056,246	$	2,845,214	Net sales	$	3,037,755	$	3,115,311
Net earnings	Net earnings	332,195		375,112		Net earnings	327,032		294,878

Net earnings per share:	Net earnings per share:					Net earnings per share:
Basic	Basic	$	6.13	$	6.79	Basic	$	6.10	$	5.44
Diluted	Diluted	$	6.03	$	6.64	Diluted	$	6.03	$	5.35

The historical consolidated financial information of the company and the acquisitions have been adjusted in the pro forma information to give effect to 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) 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 pending litigation will have a material effect on its financial condition, results of operations or cash flows.

1310

4) Recently Issued Accounting Standards

Accounting Pronouncements - Recently Adopted

~~On May 3,~~In October 2021, the ~~FASB~~Financial Accounting Standards Board (the “FASB”) issued ~~ASU 2021-04, Earnings Per Share~~Accounting Standards Update (“ASU”) 2021-08, “Business Combinations (Topic ~~260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)~~805): ~~Issuer’s~~ Accounting for ~~Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This~~Contract Assets and Contract Liabilities from Contracts with Customers.” The new ~~standard provides clarification~~accounting rules require entities to apply “Revenue from Contracts with Customers (Topic 606)” to recognize and ~~reduces diversity~~measure contract assets and contract liabilities in ~~an issuer’s~~a business combination. The new accounting ~~for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. This guidance is~~rules were effective for ~~fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, including adoption~~the Company in ~~an interim period.~~the first quarter of 2023. The company adopted this standard in the first quarter of ~~2022~~2023 and it did not have a material impact on its Consolidated Financial Statements and disclosures.

~~Accounting Pronouncements - To be adopted~~

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 onas of January ~~2, 2022~~1, 2023 and only impacts annual financial statement footnote disclosures. The company ~~is currently evaluating~~adopted this standard in the ~~impacts the adoption~~first quarter of ~~this guidance will~~2023 and it did not have a material impact on its Consolidated Financial Statements and disclosures.

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 ~~is currently evaluating~~adopted this standard in the ~~impacts the adoption~~first quarter of ~~this guidance will~~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. ~~Early adoption is permitted, including adoption in an interim period.~~ 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 impacts the adoption of this guidance will have on its Consolidated Financial Statements and disclosures.

1411

5) Revenue Recognition

Disaggregation of Revenue

The company disaggregates its net sales by reportable operating segment and geographical location as the company believes it best depicts how the nature, timing and uncertainty of its 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 the company's long-term contracts within the Food Processing Equipment group is recognized over time as the equipment is manufactured and assembled. The following table summarizes the company's net sales by reportable operating segment and geographical location (in thousands):


											Commercial Foodservice		Food Processing		Residential Kitchen		Total
Three Months Ended September 30, 2023										Three Months Ended September 30, 2023
United States and Canada										United States and Canada	$	458,529	$	111,092	$	116,522	$	686,143
Asia										Asia	59,922		6,389		3,371		69,682
Europe and Middle East										Europe and Middle East	91,112		34,250		57,474		182,836
Latin America										Latin America	24,446		14,936		2,608		41,990
Total										Total	$	634,009	$	166,667	$	179,975	$	980,651

Nine Months Ended September 30, 2023										Nine Months Ended September 30, 2023
United States and Canada										United States and Canada	$	1,385,929	$	354,945	$	395,236	$	2,136,110
Asia										Asia	173,901		30,507		8,652		213,060
Europe and Middle East										Europe and Middle East	272,252		101,808		194,631		568,691
Latin America										Latin America	61,525		41,658		6,985		110,168
Total										Total	$	1,893,607	$	528,918	$	605,504	$	3,028,029
		Commercial Foodservice		Food Processing		Residential Kitchen		Total
Three Months Ended October 1, 2022	Three Months Ended October 1, 2022									Three Months Ended October 1, 2022
United States and Canada	United States and Canada	$	464,053	$	104,367	$	145,757	$	714,177	United States and Canada	$	459,971	$	108,449	$	145,757	$	714,177
Asia	Asia	55,243		7,805		11,647		74,695		Asia	55,243		7,805		11,647		74,695
Europe and Middle East	Europe and Middle East	86,962		24,264		60,200		171,426		Europe and Middle East	86,963		24,263		60,200		171,426
Latin America	Latin America	17,404		11,808		3,361		32,573		Latin America	17,380		11,832		3,361		32,573
Total	Total	$	623,662	$	148,244	$	220,965	$	992,871	Total	$	619,557	$	152,349	$	220,965	$	992,871

Nine Months Ended October 1, 2022	Nine Months Ended October 1, 2022									Nine Months Ended October 1, 2022
United States and Canada	United States and Canada	$	1,313,332	$	287,037	$	563,047	$	2,163,416	United States and Canada	$	1,302,591	$	297,778	$	563,047	$	2,163,416
Asia	Asia	148,430		15,662		27,724		191,816		Asia	148,419		15,673		27,724		191,816
Europe and Middle East	Europe and Middle East	267,565		58,924		234,203		560,692		Europe and Middle East	267,558		58,931		234,203		560,692
Latin America	Latin America	47,667		30,477		7,080		85,224		Latin America	47,281		30,863		7,080		85,224
Total	Total	$	1,776,994	$	392,100	$	832,054	$	3,001,148	Total	$	1,765,849	$	403,245	$	832,054	$	3,001,148

Three Months Ended October 2, 2021
United States and Canada		$	366,619	$	84,443	$	113,230	$	564,292
Asia		49,489		4,257		2,741		56,487
Europe and Middle East		82,881		14,332		76,310		173,523
Latin America		12,491		9,638		1,114		23,243
Total		$	511,480	$	112,670	$	193,395	$	817,545

Nine Months Ended October 2, 2021
United States and Canada		$	1,064,482	$	259,577	$	335,138	$	1,659,197
Asia		146,849		10,713		7,631		165,193
Europe and Middle East		255,649		56,507		181,359		493,515
Latin America		34,433		28,375		3,663		66,471
Total		$	1,501,413	$	355,172	$	527,791	$	2,384,376

1512

Contract Balances

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 Condensed Consolidated Balance Sheet. Contract assets are transferred to receivables when the right to consideration becomes unconditional. Accounts receivable are not considered contract assets under the revenue standard as contract assets are conditioned upon the company's future satisfaction of a performance obligation. Accounts receivable, in contracts, are unconditional rights to consideration.

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 Condensed Consolidated Balance Sheet. Non-current contract liabilities are recorded in other non-current liabilities in the Condensed 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):


		Oct 1, 2022		Jan 1, 2022			Sep 30, 2023		Dec 31, 2022
Contract assets	Contract assets	$	38,327	$	21,592	Contract assets	$	59,129	$	40,438
Contract liabilities	Contract liabilities	$	189,863	$	133,315	Contract liabilities	$	141,388	$	185,824
Non-current contract liabilities	Non-current contract liabilities	$	11,452	$	11,602	Non-current contract liabilities	$	15,328	$	12,495

During the nine months period ended ~~October 1, 2022,~~September 30, 2023, the company reclassified ~~$15.0~~$32.2 million to receivables, which was included in the contract asset balance at the beginning of the period. During the nine months period ended ~~October 1, 2022,~~September 30, 2023, the company recognized revenue of ~~$94.5~~$99.4 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 ~~$162.7~~$88.3 million during the nine months period ended ~~October 1, 2022.~~September 30, 2023. In addition, contract liabilities increased due to the acquisitions during the nine months ended ~~October 1, 2022.~~September 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 the nine months period ended ~~October 1, 2022.~~September 30, 2023.

1613

6) Other Comprehensive Income

Changes in accumulated other comprehensive income(1) were as follows (in thousands):


													Currency Translation Adjustment		Pension Benefit Costs		Unrealized Gain/(Loss) Interest Rate Swap		Unrealized Loss Certain Investments		Total
Balance as of December 31, 2022												Balance as of December 31, 2022	$	(205,345)	$	(121,701)	$	48,574	$	—	$	(278,472)
Other comprehensive income before reclassification												Other comprehensive income before reclassification	(4,751)		(2,131)		21,872		—		14,990
Amounts reclassified from accumulated other comprehensive income												Amounts reclassified from accumulated other comprehensive income	—		1,587		(23,963)		—		(22,376)
Net current-period other comprehensive income												Net current-period other comprehensive income	$	(4,751)	$	(544)	$	(2,091)	—		$	(7,386)
Balance as of September 30, 2023												Balance as of September 30, 2023	$	(210,096)	$	(122,245)	$	46,483	—		$	(285,858)
		Currency Translation Adjustment		Pension Benefit Costs		Unrealized Gain/(Loss) Interest Rate Swap		Unrealized Gain/(Loss) Certain Investments		Total
Balance as of January 1, 2022	Balance as of January 1, 2022	$	(97,654)	$	(249,696)	$	(13,064)	$	1,330	$	(359,084)	Balance as of January 1, 2022	$	(97,654)	$	(249,696)	$	(13,064)	$	1,330	$	(359,084)
Other comprehensive income before reclassification	Other comprehensive income before reclassification	(201,176)		44,127		55,958		(1,330)		(102,421)		Other comprehensive income before reclassification	(201,176)		44,127		55,958		(1,330)		(102,421)
Amounts reclassified from accumulated other comprehensive income	Amounts reclassified from accumulated other comprehensive income	—		—		7,646		—		7,646		Amounts reclassified from accumulated other comprehensive income	—		—		7,646		—		7,646
Net current-period other comprehensive income	Net current-period other comprehensive income	$	(201,176)	$	44,127	$	63,604	(1,330)		$	(94,775)	Net current-period other comprehensive income	$	(201,176)	$	44,127	$	63,604	$	(1,330)	$	(94,775)
Balance as of October 1, 2022	Balance as of October 1, 2022	$	(298,830)	$	(205,569)	$	50,540	—		$	(453,859)	Balance as of October 1, 2022	$	(298,830)	$	(205,569)	$	50,540	$	—	$	(453,859)

Balance as of January 2, 2021		$	(49,961)	$	(400,919)	$	(37,548)	$	—	$	(488,428)
Other comprehensive income before reclassification		(33,000)		3,052		1,480		—		(28,468)
Amounts reclassified from accumulated other comprehensive income		—		—		14,691		—		14,691
Net current-period other comprehensive income		$	(33,000)	$	3,052	$	16,171	$	—	$	(13,777)
Balance as of October 2, 2021		$	(82,961)	$	(397,867)	$	(21,377)	$	—	$	(502,205)

(1) As of September 30, 2023, pension and interest rate swap are net of tax of $(1.5) million and $16.1 million, respectively. During the nine months ended September 30, 2023, the adjustments to pension and interest rate swap were net of tax of $0.5 million and $(0.7) million, respectively. As of October 1, 2022, pension, ~~and~~ interest rate swap, and gain on investment amounts are net of tax of $(32.6) million and $17.9 million, respectively. During the nine months ended October 1, 2022, the adjustments to pension, unrealized gain/(loss) interest rate swap, and loss on investments were net of tax of $6.9 million, $22.4 million, and $(0.4) million, respectively. As of October 2, 2021, pension and interest rate swap amounts are net of tax of $(88.4) million and $(7.5) million, respectively. During the nine months ended October 2, 2021, the adjustments to pension benefit costs and unrealized gain/(loss) interest rate swap were net of tax of $0.7 million and $5.6 million, respectively.

Components of other comprehensive income were as follows (in thousands):


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		Oct 1, 2022		Oct 2, 2021		Oct 1, 2022		Oct 2, 2021			Sep 30, 2023		Oct 1, 2022		Sep 30, 2023		Oct 1, 2022
Net earnings	Net earnings	$	104,369	$	175,966	$	303,372	$	385,814	Net earnings	$	108,650	$	104,369	$	324,589	$	303,372
Currency translation adjustment	Currency translation adjustment	(81,774)		(21,881)		(201,176)		(33,000)		Currency translation adjustment	(36,602)		(81,774)		(4,751)		(201,176)
Pension liability adjustment, net of tax	Pension liability adjustment, net of tax	17,928		5,870		44,127		3,052		Pension liability adjustment, net of tax	4,436		17,928		(544)		44,127
Unrealized gain on interest rate swaps, net of tax		24,360		3,056		63,604		16,171
Unrealized gain (loss) on interest rate swaps, net of tax										Unrealized gain (loss) on interest rate swaps, net of tax	20		24,360		(2,091)		63,604
Unrealized loss on certain investments, net of tax	Unrealized loss on certain investments, net of tax	—		—		(1,330)		—		Unrealized loss on certain investments, net of tax	—		—		—		(1,330)
Comprehensive income	Comprehensive income	$	64,883	$	163,011	$	208,597	$	372,037	Comprehensive income	$	76,504	$	64,883	$	317,203	$	208,597

7) 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 ~~October 1, 2022~~September 30, 2023 and ~~January 1,~~December 31, 2022 are as follows (in thousands):


		Oct 1, 2022		Jan 1, 2022			Sep 30, 2023		Dec 31, 2022
Raw materials and parts	Raw materials and parts	$	569,965	$	421,361	Raw materials and parts	$	529,698	$	595,325
Work-in-process	Work-in-process	95,952		65,581		Work-in-process	94,057		86,083
Finished goods	Finished goods	396,717		350,476		Finished goods	391,292		396,321
		$	1,062,634	$	837,418		$	1,015,047	$	1,077,729

1714

8) Goodwill

Changes in the carrying amount of goodwill for the nine months ended ~~October 1, 2022~~September 30, 2023 are as follows (in thousands):


		Commercial Foodservice		Food Processing		Residential Kitchen		Total			Commercial Foodservice		Food Processing		Residential Kitchen		Total
Balance as of January 1, 2022		$	1,285,087	$	250,715	$	707,667	$	2,243,469
Balance as of December 31, 2022										Balance as of December 31, 2022	$	1,309,776	$	350,303	$	751,755	$	2,411,834
Goodwill acquired during the year	Goodwill acquired during the year	5,469		86,314		2,265		94,048		Goodwill acquired during the year	8,256		17,923		13,332		39,511
Measurement period adjustments to goodwill acquired in prior year	Measurement period adjustments to goodwill acquired in prior year	858		—		53,948		54,806		Measurement period adjustments to goodwill acquired in prior year	2,412		1,540		—		3,952
Exchange effect	Exchange effect	(31,328)		(12,245)		(61,330)		(104,903)		Exchange effect	(4,573)		(1,591)		3,286		(2,878)
Balance as of October 1, 2022		$	1,260,086	$	324,784	$	702,550	$	2,287,420
Balance as of September 30, 2023										Balance as of September 30, 2023	$	1,315,871	$	368,175	$	768,373	$	2,452,419

The annual impairment assessment for goodwill and indefinite-lived intangible assets is performed as of the first day of the fourth quarter and since that assessment, the company does not believe there are any indicators of impairment requiring subsequent analysis. This is supported by the review of order rates, backlog levels and financial performance across business segments.

9) Intangibles

Intangible assets consist of the following (in thousands):


		October 1, 2022					January 1, 2022						September 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			Estimated Weighted Avg Remaining Life	Gross Carrying Amount		Accumulated Amortization		Estimated Weighted Avg Remaining Life	Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets:	Amortized intangible assets:											Amortized intangible assets:
Customer lists	Customer lists	7.7	$	824,595	$	(439,285)	7.6	$	863,339	$	(411,327)	Customer lists	7.2	$	839,507	$	(509,610)	7.6	$	839,811	$	(460,885)
Backlog	Backlog	0.3	19,556		(16,512)		0.2	13,684		(929)		Backlog	0.0	7,496		(7,286)		0.1	8,301		(6,352)
Developed technology	Developed technology	8.5	77,389		(33,953)		8.9	73,461		(29,952)		Developed technology	8.4	97,886		(42,290)		8.3	79,763		(35,797)
			$	921,540	$	(489,750)		$	950,484	$	(442,208)			$	944,889	$	(559,186)		$	927,875	$	(503,034)
Indefinite-lived assets:	Indefinite-lived assets:											Indefinite-lived assets:
Trademarks and tradenames	Trademarks and tradenames		$	1,350,011				$	1,367,101			Trademarks and tradenames		$	1,389,843				$	1,369,391

The aggregate intangible amortization expense was ~~$19.8~~$18.9 million and ~~$18.2~~$19.8 million for the three months period ended September 30, 2023 and October 1, 2022, ~~and October 2, 2021,~~ respectively. The aggregate intangible amortization expense was ~~$69.9~~$56.6 million and ~~$54.9~~$69.9 million for the nine months period ended September 30, 2023 and October 1, 2022, ~~and October 2, 2021,~~ respectively. The estimated future amortization expense of intangible assets is as follows (in thousands):


Twelve Month Period coinciding with the end of the company's Fiscal Third Quarter	Twelve Month Period coinciding with the end of the company's Fiscal Third Quarter	Amortization Expense		Twelve Month Period coinciding with the end of the company's Fiscal Third Quarter	Amortization Expense

2023		$	75,415
2024	2024	63,916		2024	$	66,884
2025	2025	55,088		2025	57,668
2026	2026	52,949		2026	55,416
2027	2027	44,612		2027	47,063
2028				2028	40,934
Thereafter	Thereafter	139,810		Thereafter	117,738
		$	431,790		$	385,703

1815

10) Accrued Expenses

Accrued expenses consist of the following (in thousands):


		Oct 1, 2022		Jan 1, 2022			Sep 30, 2023		Dec 31, 2022
Contract liabilities	Contract liabilities	$	189,863	$	133,315	Contract liabilities	$	141,388	$	185,824
Accrued payroll and related expenses	Accrued payroll and related expenses	108,272		115,762		Accrued payroll and related expenses	115,363		122,861
Accrued warranty	Accrued warranty	78,975		80,215		Accrued warranty	87,327		82,096
Accrued customer rebates	Accrued customer rebates	64,852		72,451		Accrued customer rebates	56,357		70,706
Accrued short-term leases	Accrued short-term leases	23,916		22,753		Accrued short-term leases	26,634		25,250
Accrued sales and other tax						Accrued sales and other tax	24,889		24,044
Accrued contingent consideration						Accrued contingent consideration	19,720		20,529
Accrued professional fees	Accrued professional fees	22,525		19,292		Accrued professional fees	18,442		19,541
Accrued sales and other tax		19,786		22,684
Accrued agent commission	Accrued agent commission	17,629		13,670		Accrued agent commission	16,788		17,381
Accrued product liability and workers compensation	Accrued product liability and workers compensation	11,573		10,952		Accrued product liability and workers compensation	11,150		11,326
Accrued contingent consideration		8,409		18,728

Other accrued expenses	Other accrued expenses	86,145		73,033		Other accrued expenses	77,484		91,769

		$	631,945	$	582,855		$	595,542	$	671,327

11) 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, actual claims costs may differ from amounts provided. Adjustments to initial obligations for warranties are made as changes in the obligations become reasonably estimable.

A rollforward of the warranty reserve is as follows (in thousands):


	Nine Months Ended
	~~Oct 1, 2022~~Sep 30, 2023
Balance as of ~~January 1,~~December 31, 2022	$	~~80,215~~82,096
Warranty reserve related to acquisitions	~~1,523~~290
Warranty expense	~~53,139~~67,892
Warranty claims	~~(55,902)~~(62,951)
Balance as of ~~October 1, 2022~~September 30, 2023	$	~~78,975~~87,327

1916

12) Financing Arrangements


		Oct 1, 2022		Jan 1, 2022			Sep 30, 2023		Dec 31, 2022
		(in thousands)					(in thousands)
Senior secured revolving credit line	Senior secured revolving credit line	$	270,623	$	683,175	Senior secured revolving credit line	$	148,645	$	251,805
Term loan facility	Term loan facility	975,440		993,340		Term loan facility	951,819		975,785
Delayed draw term loan facility	Delayed draw term loan facility	750,000		—		Delayed draw term loan facility	731,250		750,000
Convertible senior notes	Convertible senior notes	737,019		734,417		Convertible senior notes	740,602		737,918
Foreign loans	Foreign loans	3,957		2,224		Foreign loans	7,169		5,917
Other debt arrangement	Other debt arrangement	950		1,138		Other debt arrangement	741		899
Total debt	Total debt	2,737,989		2,414,294		Total debt	2,580,226		2,722,324
Less: Current maturities of long-term debt	Less: Current maturities of long-term debt	44,664		27,293		Less: Current maturities of long-term debt	44,330		45,583
Long-term debt	Long-term debt	$	2,693,325	$	2,387,001	Long-term debt	$	2,535,896	$	2,676,741

Credit Facility

As of ~~October 1, 2022,~~September 30, 2023, the company had ~~$2.0~~$1.8 billion of borrowings outstanding under its credit facility (the "Credit Facility"), including ~~$981.3~~$956.3 million outstanding under the term loan ($~~975~~951.8 million, net of unamortized issuance fees) and ~~$750~~$731.3 million outstanding under the delayed draw term loan. The company also had ~~$1.7~~$1.6 million in outstanding letters of credit as of ~~October 1, 2022,~~September 30, 2023, which reduces the borrowing availability under the Credit Facility. Remaining borrowing capacity under this facility was ~~$2.5~~$2.6 billion at ~~October 1, 2022.~~September 30, 2023.

On August 11, 2022, the company borrowed ~~$750~~$750.0 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 ~~will amortize~~amortizes in quarterly installments due on the last day of each fiscal quarter, ~~commencing~~and commenced on ~~October 1,~~December 31, 2022, in an amount equal to 0.625% of the principal drawn, with the balance, plus any accrued interest payable by October 21, 2026.

At ~~October 1, 2022,~~September 30, 2023, borrowings under the Credit Facility accrued interest at a rate of 1.625% above ~~LIBOR~~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 ~~LIBOR~~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. ~~Borrowings~~As of September 30, 2023, borrowings under the Credit Facility ~~will accrue~~accrued interest at a minimum of 1.625% above ~~LIBOR~~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 ~~3.60%~~5.11% at the end of the period and the variable commitment fee was equal to 0.25% per annum as of ~~October 1, 2022.~~September 30, 2023.

The term loan and delayed draw term loan facilities had an average interest rate per annum, inclusive of hedging instruments, of ~~3.73%~~4.94% as of ~~October 1, 2022.~~September 30, 2023.

In addition, the company has international credit facilities to fund working capital needs outside the United States. At ~~October 1, 2022,~~September 30, 2023, these foreign credit facilities amounted to ~~$4.0~~$7.2 million in U.S. Dollars with a weighted average per annum interest rate of approximately ~~1.42%~~1.56%.

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):

Oct 1, 2022 Jan 1, 2022
Carrying Value Fair Value Carrying Value Fair Value
Total debt excluding convertible senior notes $ 2,000,970 $ 2,006,780 $ 1,679,877 $ 1,686,537


	Sep 30, 2023				Dec 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value
Total debt excluding convertible senior notes	$	1,839,624	$	1,844,055	$	1,984,406	$	1,989,871

2017

The company uses floating-to-fixed interest rate swap agreements to hedge variable interest rate risk associated with the Credit Facility. At ~~October 1, 2022,~~September 30, 2023, the company had outstanding floating-to-fixed interest rate swaps totaling ~~$229.0~~$208.0 million notional amount carrying an average interest rate of ~~2.13%~~1.55% maturing in less than 12 months and ~~$948.0~~$740.0 million notional amount carrying an average interest rate of ~~1.70%~~1.69% that mature in more than 12 months but less than 6453 months.

At ~~October 1, 2022,~~September 30, 2023, the company was in compliance with all covenants pursuant to its borrowing agreements.

Convertible Notes

The following table summarizes the outstanding principal amount and carrying value of the Convertible Notes:


		Oct 1, 2022		Jan 1, 2022				Sep 30, 2023		Dec 31, 2022
		(in thousands)				(in thousands)
Principal amounts:	Principal amounts:						Principal amounts:
Principal	Principal	$	747,499	$	747,500		Principal	$	747,499	$	747,499

Unamortized issuance costs	Unamortized issuance costs	(10,480)		(13,083)			Unamortized issuance costs	(6,897)		(9,581)
Net carrying amount	Net carrying amount	$	737,019	$	734,417		Net carrying amount	$	740,602	$	737,918

The following table summarizes total interest expense recognized related to the Convertible Notes:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		Oct 1, 2022		Oct 2, 2021		Oct 1, 2022		Oct 2, 2021			Sep 30, 2023		Oct 1, 2022		Sep 30, 2023		Oct 1, 2022
Contractual interest expense	Contractual interest expense	$	1,848	$	1,848	$	5,606	$	5,607	Contractual interest expense	$	1,847	$	1,848	$	5,585	$	5,606
Interest cost related to amortization of issuance costs	Interest cost related to amortization of issuance costs	888		864		2,688		2,620		Interest cost related to amortization of issuance costs	889		888		2,685		2,688
Total interest expense	Total interest expense	$	2,736	$	2,712	$	8,294	$	8,227	Total interest expense	$	2,736	$	2,736	$	8,270	$	8,294

The estimated fair value of the Convertible Notes was ~~$859.6~~$837.8 million as of ~~October 1, 2022~~September 30, 2023 and was determined through consideration of quoted market prices. The fair value is classified as Level 2, as defined in Note 1(d), Fair Value Measurements, in these Notes to the Condensed Consolidated Financial Statement. The if-converted value of the Convertible Notes did not exceed their respective principal value as of ~~October 1, 2022.~~September 30, 2023.

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. 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.

2118

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.

13) Financial Instruments

Foreign Exchange: The company uses foreign currency forward, foreign exchange swaps and option purchase and sales contracts 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 notional amount of foreign currency contracts outstanding was ~~$547.7~~$224.6 million and ~~$350.5~~$562.5 million as of ~~October 1, 2022~~September 30, 2023 and ~~January 1,~~December 31, 2022, respectively. The fair value of the forward and option contracts was a loss of ~~$4.4~~$0.6 million at the end of the third quarter of ~~2022.~~2023.

Interest Rate: The company has entered into interest rate swaps to fix the interest rate applicable to certain of its variable-rate debt. The agreements ~~swap~~swapped one-month LIBOR for fixed rates. In February 2022, the company entered into an additional floating-to-fixed interest rate swap agreement that uses a daily ~~Secured Overnight Financing Rate ("SOFR")~~SOFR in lieu of LIBOR. In April 2023, all outstanding LIBOR swap agreements were amended to one month term SOFR. 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 ~~October 1, 2022,~~September 30, 2023, the fair value of these instruments was an asset of ~~$68.0~~$62.2 million. The change in fair value of these swap agreements in the first nine months of ~~2022~~2023 was a ~~gain~~loss of ~~$63.6~~$2.1 million, net of taxes.

The following table summarizes the company’s fair value of interest rate swaps (in thousands):


		Condensed Consolidated Balance Sheet Presentation	Oct 1, 2022		Jan 1, 2022			Condensed Consolidated Balance Sheet Presentation	Sep 30, 2023		Dec 31, 2022
Fair value	Fair value	Prepaid expense and other	$	5,495	$	—	Fair value	Prepaid expense and other	$	3,288	$	6,805
Fair value	Fair value	Other assets	$	62,508	$	3,645	Fair value	Other assets	$	58,875	$	58,180
Fair value		Accrued expenses	$	—	$	1,171
Fair value		Other non-current liabilities	$	—	$	20,464

The impact on earnings from interest rate swaps was as follows (in thousands):


			Three Months Ended				Nine Months Ended						Three Months Ended				Nine Months Ended
		Presentation of Gain/(loss)	Oct 1, 2022		Oct 2, 2021		Oct 1, 2022		Oct 2, 2021			Presentation of Gain/(loss)	Sep 30, 2023		Oct 1, 2022		Sep 30, 2023		Oct 1, 2022
Gain/(loss) recognized in accumulated other comprehensive income	Gain/(loss) recognized in accumulated other comprehensive income	Other comprehensive income	$	33,105	$	(340)	$	78,347	$	7,117	Gain/(loss) recognized in accumulated other comprehensive income	Other comprehensive income	$	8,706	$	33,105	$	21,141	$	78,347
Gain/(loss) reclassified from accumulated other comprehensive income (effective portion)	Gain/(loss) reclassified from accumulated other comprehensive income (effective portion)	Interest expense	$	171	$	(4,461)	$	(7,646)	$	(14,691)	Gain/(loss) reclassified from accumulated other comprehensive income (effective portion)	Interest expense	$	8,679	$	171	$	23,963	$	(7,646)

Interest rate swaps are subject to default risk to the extent the counterparties are unable to satisfy their settlement obligations under the interest rate swap agreements. The company reviews the credit profile of the financial institutions that are counterparties to such swap agreements and assesses their creditworthiness prior to entering into the interest rate swap agreements and throughout the term. The interest rate swap agreements typically contain provisions that allow the counterparty to require early settlement in the event that the company becomes insolvent or is unable to maintain compliance with its covenants under its existing debt agreements.

14) Segment Information

The company operates in three reportable operating segments defined by management reporting structure and operating activities.

The Commercial Foodservice Equipment Group has a broad portfolio of foodservice equipment, which enables 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. 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 ~~IoT solutions.~~controls development and manufacturing.

The Food Processing Equipment Group offers a broad portfolio of processing solutions for customers producing ~~pre-cooked meat~~protein products, such as bacon, salami, hot dogs, dinner sausages, poultry and lunchmeats and baked goods such as muffins, cookies, crackers, pies, bread and ~~bread.~~buns. Through its broad line of products, the company is able to deliver a wide array of ~~cooking~~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 a uniquely integrated solution providing for the highest level of food quality, product consistency, and reduced operating costs resulting from increased product yields, increased capacity and greater throughput and reduced labor costs through automation. The products offered by this group include a wide array of cooking and baking solutions, including batch ovens, baking ovens, proofing ovens, conveyor belt ovens, continuous processing ovens, frying systems and automated thermal processing systems. The company also provides a comprehensive portfolio of complementary food preparation equipment such as tumblers, massagers, grinders, slicers, reduction and emulsion systems, mixers, blenders, formers, battering equipment, breading equipment, seeding equipment, water cutting systems, food presses, food suspension equipment, filling and depositing solutions, and forming equipment, as well as a variety of automated loading and unloading systems, 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.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The chief operating decision maker evaluates individual segment performance based on operating income.

Net Sales Summary

(dollars in thousands)


		Three Months Ended								Nine Months Ended									Three Months Ended								Nine Months Ended
		Oct 1, 2022				Oct 2, 2021				Oct 1, 2022				Oct 2, 2021					Sep 30, 2023				Oct 1, 2022				Sep 30, 2023				Oct 1, 2022
		Sales		Percent		Sales		Percent		Sales		Percent		Sales		Percent			Sales		Percent		Sales		Percent		Sales		Percent		Sales		Percent
Business Segments:	Business Segments:																	Business Segments:
Commercial Foodservice	Commercial Foodservice	$	623,662	62.8	%	$	511,480	62.6	%	$	1,776,994	59.2	%	$	1,501,413	63.0	%	Commercial Foodservice	$	634,009	64.7	%	$	619,557	62.4	%	$	1,893,607	62.5	%	$	1,765,849	58.8	%
Food Processing	Food Processing	148,244		14.9		112,670		13.8		392,100		13.1		355,172		14.9		Food Processing	166,667		17.0		152,349		15.3		528,918		17.5		403,245		13.5
Residential Kitchen	Residential Kitchen	220,965		22.3		193,395		23.6		832,054		27.7		527,791		22.1		Residential Kitchen	179,975		18.3		220,965		22.3		605,504		20.0		832,054		27.7
Total	Total	$	992,871	100.0	%	$	817,545	100.0	%	$	3,001,148	100.0	%	$	2,384,376	100.0	%	Total	$	980,651	100.0	%	$	992,871	100.0	%	$	3,028,029	100.0	%	$	3,001,148	100.0	%

2320

The following table summarizes the results of operations for the company's business segments (in thousands):


													Commercial Foodservice		Food Processing		Residential Kitchen		Corporate and Other (1)		Total
Three Months Ended September 30, 2023												Three Months Ended September 30, 2023
Net sales												Net sales	$	634,009	$	166,667	$	179,975	$	—	$	980,651
Income (loss) from operations (2, 3)												Income (loss) from operations (2, 3)	158,582		37,472		10,915		(32,528)		174,441
Depreciation expense (4)												Depreciation expense (4)	6,957		1,924		3,304		403		12,588
Amortization expense (5)												Amortization expense (5)	13,959		2,677		2,280		1,777		20,693
Net capital expenditures												Net capital expenditures	7,056		6,672		6,825		777		21,330

Nine Months Ended September 30, 2023												Nine Months Ended September 30, 2023
Net sales												Net sales	$	1,893,607	$	528,918	$	605,504	$	—	$	3,028,029
Income (loss) from operations (2, 3)												Income (loss) from operations (2, 3)	452,113		111,483		51,197		(94,559)		520,234
Depreciation expense (4)												Depreciation expense (4)	20,134		5,910		10,070		974		37,088
Amortization expense (5)												Amortization expense (5)	42,905		6,946		6,768		5,351		61,970
Net capital expenditures												Net capital expenditures	34,805		11,744		20,579		2,517		69,645

Total assets												Total assets	$	3,775,421	$	1,030,366	$	1,976,071	$	140,750	$	6,922,608
		Commercial Foodservice		Food Processing		Residential Kitchen		Corporate and Other (1)		Total
Three Months Ended October 1, 2022	Three Months Ended October 1, 2022											Three Months Ended October 1, 2022
Net sales	Net sales	$	623,662	$	148,244	$	220,965	$	—	$	992,871	Net sales	$	619,557	$	152,349	$	220,965	$	—	$	992,871
Income (loss) from operations (2, 3)	Income (loss) from operations (2, 3)	143,678		26,982		29,788		(38,743)		161,705		Income (loss) from operations (2, 3)	142,999		27,661		29,788		(38,743)		161,705
Depreciation expense		5,855		1,558		1,861		205		9,479
Depreciation expense (4)												Depreciation expense (4)	5,822		1,591		1,861		205		9,479
Amortization expense (5)	Amortization expense (5)	14,283		4,311		1,289		1,778		21,661		Amortization expense (5)	14,124		4,470		1,289		1,778		21,661
Net capital expenditures	Net capital expenditures	10,235		2,959		5,211		376		18,781		Net capital expenditures	10,235		2,959		5,211		376		18,781

Nine Months Ended October 1, 2022	Nine Months Ended October 1, 2022											Nine Months Ended October 1, 2022
Net sales	Net sales	$	1,776,994	$	392,100	$	832,054	$	—	$	3,001,148	Net sales	$	1,765,849	$	403,245	$	832,054	$	—	$	3,001,148
Income (loss) from operations (2, 3)	Income (loss) from operations (2, 3)	390,740		65,642		100,811		(105,697)		451,496		Income (loss) from operations (2, 3)	390,218		66,164		100,811		(105,697)		451,496
Depreciation expense		17,577		4,182		9,271		578		31,608
Depreciation expense (4)												Depreciation expense (4)	17,478		4,281		9,271		578		31,608
Amortization expense (5)	Amortization expense (5)	41,644		7,844		20,448		5,373		75,309		Amortization expense (5)	41,169		8,319		20,448		5,373		75,309
Net capital expenditures	Net capital expenditures	23,178		10,108		16,457		1,171		50,914		Net capital expenditures	23,165		10,121		16,457		1,171		50,914

Total assets	Total assets	$	3,718,045	$	856,532	$	1,949,883	$	147,401	$	6,671,861	Total assets	$	3,716,686	$	857,891	$	1,949,883	$	147,401	$	6,671,861

Three Months Ended October 2, 2021
Net sales		$	511,480	$	112,670	$	193,395	$	—	$	817,545
Income (loss) from operations (2, 3, 6)		105,529		21,425		31,322		75,206		233,482
Depreciation expense		5,793		1,353		3,608		122		10,876
Amortization expense (5)		12,822		1,773		3,589		1,570		19,754
Net capital expenditures		6,391		1,106		2,127		797		10,421

Nine Months Ended October 2, 2021
Net sales		$	1,501,413	$	355,172	$	527,791	$	—	$	2,384,376
Income (loss) from operations (2, 3, 4, 6)		311,789		68,048		95,088		16,447		491,372
Depreciation expense		17,579		4,005		9,120		476		31,180
Amortization expense (5)		42,272		5,450		7,145		4,625		59,492
Net capital expenditures		17,599		3,539		7,256		1,338		29,732

Total assets		$	3,498,696	$	640,229	$	1,578,857	$	55,069	$	5,772,851

(1)Includes corporate and other general company assets and operations.

(2)Non-operating expenses are not allocated to the operating segments. Non-operating expenses consist of interest expense and deferred financing amortization, foreign exchange gains and losses and other income and expense items outside of income from operations.

(3)Restructuring expenses are allocated in operating income by segment.

(4)~~Gain/(loss)~~Includes depreciation on ~~sale~~right of ~~plants are included in Commercial Foodservice and Residential Kitchen.~~use assets.

(5)Includes amortization of deferred financing costs and Convertible Notes issuance costs.

~~(6)Termination fee from Welbilt merger is included in Corporate and Other.~~

2421

Geographic Information

Long-lived assets, not including goodwill and other intangibles (in thousands):


		Oct 1, 2022		Oct 2, 2021			Sep 30, 2023		Oct 1, 2022
United States and Canada	United States and Canada	$	470,952	$	353,928	United States and Canada	$	525,347	$	470,952

Asia	Asia	33,432		18,148		Asia	39,294		33,432
Europe and Middle East	Europe and Middle East	135,341		204,192		Europe and Middle East	154,794		135,341
Latin America	Latin America	12,377		8,063		Latin America	14,351		12,377
Total international	Total international	$	181,150	$	230,403	Total international	$	208,439	$	181,150
		$	652,102	$	584,331		$	733,786	$	652,102

15) Employee Retirement Plans

The following table summarizes the company's net periodic pension benefit related to the AGA Group pension plans (in thousands):


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		Oct 1, 2022		Oct 2, 2021		Oct 1, 2022		Oct 2, 2021			Sep 30, 2023		Oct 1, 2022		Sep 30, 2023		Oct 1, 2022
Net Periodic Pension Benefit:	Net Periodic Pension Benefit:									Net Periodic Pension Benefit:
Service cost		$	—	$	194	$	—	$	584
Interest cost	Interest cost	5,881		4,287		18,867		12,927		Interest cost	11,606		5,881		$	34,220	$	18,867
Expected return on assets	Expected return on assets	(17,505)		(19,516)		(56,155)		(58,851)		Expected return on assets	(14,816)		(17,505)		(43,687)		(56,155)
Amortization of net loss (gain)		847		3,150		2,716		9,498
Amortization of prior service cost (credit)		611		716		1,960		2,158
Amortization of net loss										Amortization of net loss	7		847		21		2,716
Amortization of prior service cost										Amortization of prior service cost	657		611		1,939		1,960

		$	(10,166)	$	(11,169)	$	(32,612)	$	(33,684)		$	(2,546)	$	(10,166)	$	(7,507)	$	(32,612)

The pension costs for all other plans of the company were not material during the period. The service cost component is recognized within Selling, general and administrative expenses and the non-operating components of pension benefit are included within Net periodic pension benefit (other than service cost) in the Condensed Consolidated Statements of Comprehensive Income.

16) Share Repurchases

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 the three months ended September 30, 2023, the company purchased zero shares of its common stock under the program. During the nine months ~~period~~ ended ~~October 1, 2022,~~September 30, 2023, the company repurchased ~~1,365,598~~397,738 shares of its common stock under the program for ~~$224.0~~$55.6 million, including applicable commissions and excise tax, which represented an average price of ~~$164.07.~~$139.68. As of ~~October 1, 2022, 2,530,263~~September 30, 2023, 3,116,364 shares had been purchased under the stock repurchase program and ~~2,469,737~~1,883,636 shares remained 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 the ~~three and~~ nine months ~~period~~ ended ~~October 1, 2022,~~September 30, 2023, the company repurchased ~~555 and 89,459~~126,550 shares of its common stock that were surrendered to the company for withholding taxes related to restricted stock vestings for ~~$0.1 million and $15.7~~$19.7 million.

2622

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Special Notes Regarding Forward-Looking Statements

This report contains forward-looking statements subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. The company cautions readers that these projections are based upon future results or events and are highly dependent upon a variety of important factors which could cause such results or events to differ materially from any forward-looking statements which may be deemed to have been made in this report, or which are otherwise made by or on behalf of the company. Such factors include, but are not limited to, ~~the impact of COVID-19 pandemic and the response of governments, businesses and other third parties;~~ volatility in earnings resulting from goodwill impairment losses which may occur irregularly and in varying amounts; variability in financing costs and interest rates; quarterly variations in operating results; dependence on key customers; international exposure; foreign exchange and political risks affecting international sales; unfavorable tax law changes and tax authority rulings; ability to protect trademarks, copyrights and other intellectual property; cybersecurity attacks and other breaches in security; changing market conditions, including inflation; the impact of competitive products and pricing; the timely development and market acceptance of the company’s products; the availability and cost of raw materials; the company's continued ability to realize profitable growth through the sourcing and completion of strategic acquisitions; and other risks detailed herein and from time-to-time in the company’s SEC filings, including the company’s ~~2021~~2022 Annual Report on Form 10-K. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. The forward-looking statements included in this report are made only as of the date hereof and, except as required by federal securities laws and rules and regulations of the SEC, the company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The ongoing conflict between Russia and Ukraine has resulted in significant economic disruption globally and may adversely affect our business and results of operations. In response to the Russia-Ukraine conflict, governments have imposed sanctions and other restrictive actions against Russia and accordingly, the company has suspended all sales into and purchases from Russia. The Russia-Ukraine conflict has resulted in increased transportation costs and supply chain challenges, and further escalation of such conflict may result in additional supply chain disruptions, among other things, which may adversely affect our business and results of operations. As the company does not have material operations in Ukraine or Russia, the impact of this conflict did not have a material impact on our results of operations during the nine months ended October 1, 2022. However, the extent of the adverse impacts of the ongoing conflict on the broader global economy cannot be predicted and could negatively impact our business and results of operations in the future.Current Events

~~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 AgreementInflation 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.

~~COVID-19 Update~~Interest Rate Environment

The ~~global coronavirus ("COVID-19") pandemic~~company has been negatively impacted by inflation in wages, logistics, energy, raw materials and ~~associated counteracting measures~~component costs. Price increases and pricing strategies have been implemented ~~by governments~~to mitigate the impact of cost inflation on margins and ~~businesses around~~ the ~~world, as well as subsequent accelerated recovery in global business activity, have increased uncertainty~~company continues to actively monitor costs. There is a delay, however, in the realization of pricing due to lead times of orders in the backlog and global ~~business environment~~supply chain and logistics constraints. High inflation has led to ~~supply chain disruptions~~increased interest rates throughout 2022 and ~~shortages in~~through the first six months of 2023, which combined with global markets for commodities, logistics and labor, as well as input cost inflation. More recently, the war in Ukraine has further contributed to some of the disruptive factors. Activity in most of our end markets we serve improved through 2021 and into 2022, although demand in certain businesses, mostmacroeconomic uncertainty can impact customer demand. Most notably in our residential segment, we have faced recent demand headwinds. ~~Despite headwinds, we have been able to expand margins in a highly inflationary environment as we~~We remain ~~committed to productivity~~focused on delivering strong financial results and executing on our long-term strategy and profitability ~~initiatives combined with diligent price actions where possible.~~ objectives.

Supply Chain, Labor and Logistics Constraints

The ~~limited availability of certain product components has resulted in lengthened lead times~~company continues to actively monitor global supply chain, labor and ~~higher input costs, including labor, energy, freight,~~ logistics ~~and in some cases, has impacted our~~constraints, which have had a negative impact on the company's ability to ~~meet customer demand. The~~source parts and complete and ship units. While the company ~~expects input costs to~~has experienced some relief of the supply chain and logistics constraints, supply chains for certain key components remain ~~elevated for some period of time, which we believe is being partially mitigated through higher pricing where permitted by market conditions.~~distressed. The availability of resources and inflationary costs have resulted in heightened inventory levels ~~negatively~~and backlogs, impacted margins and placed constraints on our operating cash flows. ~~Heightened backlog levels have also been a result. Our teams are actively evaluating~~To combat these pressures, the company has evaluated alternative ~~suppliers,~~sourcing, dual sourcing and ~~collaborating~~collaborated across the organization, where appropriate, without materially presenting new risks or increasing current risks around quality and reliability. ~~We expect our cash flows to continue to improve as we manage inventory levels to fulfill the backlog and provide for future demand.~~ Our capital resources have been sufficient to address these challenges and are expected to continue to be.

In any environment, we are focused on delivering strong financial results and executing on our long-term strategy and profitability objectives. The public health situation, continued global response measures and corresponding impacts on various markets remain fluid and uncertain and may lead to sudden changes in trajectory and outlook. The company will continue to proactively respond to the situation and may take further actions that alter our operations as may be required by governmental authorities, or that we determine are in the best interests of our employees and operations.

Net Sales Summary

(dollars in thousands)


		Three Months Ended								Nine Months Ended									Three Months Ended								Nine Months Ended
		Oct 1, 2022				Oct 2, 2021				Oct 1, 2022				Oct 2, 2021					Sep 30, 2023				Oct 1, 2022				Sep 30, 2023				Oct 1, 2022
		Sales		Percent		Sales		Percent		Sales		Percent		Sales		Percent			Sales		Percent		Sales		Percent		Sales		Percent		Sales		Percent
Business Segments:	Business Segments:																	Business Segments:
Commercial Foodservice	Commercial Foodservice	$	623,662	62.8	%	$	511,480	62.6	%	$	1,776,994	59.2	%	$	1,501,413	63.0	%	Commercial Foodservice	$	634,009	64.7	%	$	619,557	62.4	%	$	1,893,607	62.5	%	$	1,765,849	58.8	%
Food Processing	Food Processing	148,244		14.9		112,670		13.8		392,100		13.1		355,172		14.9		Food Processing	166,667		17.0		152,349		15.3		528,918		17.5		403,245		13.5
Residential Kitchen	Residential Kitchen	220,965		22.3		193,395		23.6		832,054		27.7		527,791		22.1		Residential Kitchen	179,975		18.3		220,965		22.3		605,504		20.0		832,054		27.7
Total	Total	$	992,871	100.0	%	$	817,545	100.0	%	$	3,001,148	100.0	%	$	2,384,376	100.0	%	Total	$	980,651	100.0	%	$	992,871	100.0	%	$	3,028,029	100.0	%	$	3,001,148	100.0	%

2824

Results of Operations

The following table sets forth certain consolidated statements of earnings items as a percentage of net sales for the periods:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		Oct 1, 2022		Oct 2, 2021		Oct 1, 2022		Oct 2, 2021			Sep 30, 2023		Oct 1, 2022		Sep 30, 2023		Oct 1, 2022
Net sales	Net sales	100.0	%	100.0	%	100.0	%	100.0	%	Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales	Cost of sales	63.2		63.4		64.8		63.1		Cost of sales	61.7		63.2		62.1		64.8
Gross profit	Gross profit	36.8		36.6		35.2		36.9		Gross profit	38.3		36.8		37.9		35.2
Selling, general and administrative expenses	Selling, general and administrative expenses	20.3		21.4		19.9		20.8		Selling, general and administrative expenses	20.0		20.3		20.3		19.9
Restructuring	Restructuring	0.2		0.1		0.3		0.1		Restructuring	0.5		0.2		0.4		0.3
Merger termination fee		—		(13.5)		—		(4.6)

Income from operations	Income from operations	16.3		28.6		15.0		20.6		Income from operations	17.8		16.3		17.2		15.0
Interest expense and deferred financing amortization, net	Interest expense and deferred financing amortization, net	2.4		1.6		2.1		1.8		Interest expense and deferred financing amortization, net	3.2		2.4		3.0		2.1
Net periodic pension benefit (other than service costs)	Net periodic pension benefit (other than service costs)	(1.0)		(1.4)		(1.1)		(1.4)		Net periodic pension benefit (other than service costs)	(0.2)		(1.0)		(0.2)		(1.1)
Other expense (income), net		0.9		0.1		0.6		(0.1)
Other expense, net										Other expense, net	0.1		0.9		0.1		0.6
Earnings before income taxes	Earnings before income taxes	14.0		28.3		13.4		20.3		Earnings before income taxes	14.7		14.0		14.3		13.4
Provision for income taxes	Provision for income taxes	3.5		6.7		3.3		4.1		Provision for income taxes	3.6		3.5		3.6		3.3
Net earnings	Net earnings	10.5	%	21.6	%	10.1	%	16.2	%	Net earnings	11.1	%	10.5	%	10.7	%	10.1	%

2925

Three Months Ended ~~October 1, 2022~~September 30, 2023 as compared to Three Months Ended October ~~2, 2021~~1, 2022

NET SALES. Net sales for the three months period ended ~~October 1, 2022 increased~~September 30, 2023 decreased by ~~$175.4~~$12.2 million or ~~21.5%~~1.2% to ~~$992.9~~$980.7 million as compared to ~~$817.5~~$992.9 million in the three months period ended October ~~2, 2021.~~1, 2022. Net sales increased by ~~$88.7~~$18.0 million, or ~~10.9%~~1.8%, 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 Ermes, Escher, Marco, and ~~Colussi Ermes.~~the fiscal 2023 acquisitions of Flavor Burst, Blue Sparq, Filtration Automation, Terry, and Trade-Wind. Excluding acquisitions, net sales ~~increased $86.7~~decreased $30.2 million, or ~~10.6%~~3.0%, from the prior year period. The impact of foreign exchange rates on foreign sales translated into U.S. Dollars for the three months period ended ~~October 1, 2022 decreased~~September 30, 2023 increased net sales by approximately ~~$29.3~~$13.2 million or ~~3.6%~~1.3%. Excluding the impact of foreign exchange and acquisitions, sales ~~increased 14.2%~~decreased 4.4% for the three months period ended ~~October 1, 2022~~September 30, 2023 as compared to the prior year period, including a net sales increase of ~~17.0%~~0.2% at the Commercial Foodservice Equipment Group, a net sales increase of ~~21.7%~~1.2% at the Food Processing Equipment Group and a net sales ~~increase~~decrease of ~~2.3%~~21.0% at the Residential Kitchen Equipment Group.

•Net sales of the Commercial Foodservice Equipment Group increased by ~~$112.2~~$14.4 million, or ~~21.9%~~2.3%, to ~~$623.7~~$634.0 million in the three months period ended ~~October 1, 2022,~~September 30, 2023, as compared to ~~$511.5~~$619.6 million in the prior year period. Net sales from the acquisitions of ~~Imperial, Newton CFV, Kloppenberg~~Marco, Flavor Burst, Blue Sparq, and ~~Icetro,~~Terry, which were acquired on ~~September~~December 20, 2022, January 24, ~~2021, November 16, 2021,~~2023, April ~~25, 2022~~3, 2023 and ~~June 30, 2022,~~July 5, 2023, respectively, accounted for an increase of ~~$37.9~~$8.0 million during the three months period ended ~~October 1, 2022.~~September 30, 2023. Excluding the impact of acquisitions, net sales of the Commercial Foodservice Equipment Group increased ~~$74.3~~$6.4 million, or ~~14.5%~~1.0%, as compared to the prior year period. Excluding the impact of foreign exchange and acquisitions, net sales increased ~~$87.2~~$1.1 million, or ~~17.0%~~0.2%, at the Commercial Foodservice Equipment Group. Domestically, the company realized a sales decrease of $1.5 million, or 0.3%, to $458.5 million, as compared to $460.0 million in the prior year period. This includes an increase of $3.7 million from the recent acquisitions. Excluding the acquisitions, the net decrease in domestic sales was $5.2 million, or 1.1%. The decrease in domestic sales is related to slow market conditions. International sales increased $15.9 million, or 10.0%, to $175.5 million, as compared to $159.6 million in the prior year period. This includes an increase of $4.3 million from the recent acquisitions and an increase of $5.3 million related to the favorable impact of exchange rates. Excluding the impact of foreign exchange and acquisitions, the net sales increase in international sales was $6.3 million, or 3.9%. 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 $14.4 million, or 9.5%, to $166.7 million in the three months period ended September 30, 2023, as compared to $152.3 million in the prior year period. 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 $9.2 million during the three months period ended September 30, 2023. Excluding the impact of acquisitions, net sales of the Food Processing Equipment Group increased $5.2 million, or 3.4%, as compared to the prior year period. Excluding the impact of foreign exchange and acquisitions, net sales increased $1.9 million, or 1.2%, at the Food Processing Equipment Group. Domestically, the company realized a sales increase of $2.7 million, or 2.5%, to $111.1 million, as compared to $108.4 million in the prior year period. This includes an increase of $4.5 million from the recent acquisitions. Excluding the acquisitions, the net decrease in domestic sales was $1.8 million, or 1.7%. International sales increased $11.7 million, or 26.7%, to $55.6 million, as compared to $43.9 million in the prior year period. This includes an increase of $4.7 million from the recent acquisitions and an increase of $3.3 million related to the favorable impact of exchange rates. Excluding the impact of foreign exchange and acquisitions, the net sales increase in international sales was $3.7 million, or 8.4%. The increase in international sales is primarily related to bakery products.

•Net sales of the Residential Kitchen Equipment Group decreased by $41.0 million, or 18.6%, to $180.0 million in the three months period ended September 30, 2023, as compared to $221.0 million in the prior year period. Excluding the impact of the acquisition of Trade-Wind, acquired August 1, 2023, net sales decreased $41.8 million, or 18.9%. Excluding the impact of foreign exchange and the acquisition, net sales decreased $46.4 million, or 21.0% at the Residential Kitchen Equipment Group. Domestically, the company realized a sales decrease of $29.3 million, or 20.1%, to $116.5 million, as compared to $145.8 million in the prior year period. Excluding the acquisitions, the net decrease in domestic sales was $30.1 million, or 20.6%. International sales decreased $11.7 million, or 15.6%, to $63.5 million, as compared to $75.2 million in the prior year period. This includes an increase of $4.6 million related to the favorable impact of exchange rates. Excluding the impact of foreign exchange, the net sales decrease in international sales was $16.3 million, or 21.7%. The decrease in domestic and international sales was primarily driven by challenging market conditions and higher inventory levels in the channel.

GROSS PROFIT. Gross profit increased to $375.3 million in the three months period ended September 30, 2023, as compared to $365.2 million in the prior year period, 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 approximately $4.6 million. The gross margin rate was 38.3% in the three months period ended September 30, 2023, as compared to 36.8% in the prior year period, primarily driven by higher sales volumes and improvements in product mix.

•Gross profit at the Commercial Foodservice Equipment Group increased by $20.0 million, or 8.5%, to $255.3 million in the three months period ended September 30, 2023, as compared to $235.3 million in the prior year period. Gross profit from the acquisitions of Marco, Flavor Burst, Blue Sparq, and Terry increased gross profit by $3.5 million. Excluding acquisitions, gross profit increased by $16.5 million. The impact of foreign exchange rates increased gross profit by approximately $1.7 million. The gross margin rate increased to 40.3%, as compared to 38.0% in the prior year period related to higher sales volumes and improved product mix. The gross margin rate, excluding acquisitions and the impact of foreign exchange, was 40.3%.

•Gross profit at the Food Processing Equipment Group increased by $11.1 million, or 20.1%, to $66.4 million in the three months period ended September 30, 2023, as compared to $55.3 million in the prior year period. Gross profit from the acquisitions of CP Packaging, Colussi Ermes, Escher, and Filtration Automation increased gross profit by $3.4 million. Excluding acquisitions, gross profit increased by $7.7 million related to higher sales volumes. The impact of foreign exchange rates increased gross profit by approximately $1.3 million. The gross profit margin rate increased to 39.8%, as compared to 36.3% in the prior year period. The gross margin rate, excluding acquisitions and the impact of foreign exchange, was 40.0%.

•Gross profit at the Residential Kitchen Equipment Group decreased by $20.4 million, or 27.2%, to $54.5 million in the three months period ended September 30, 2023, as compared to $74.9 million in the prior year period. The impact of foreign exchange rates increased gross profit by approximately $1.6 million. Excluding the acquisition, gross profit decreased by $20.7 million. The gross margin rate decreased to 30.3%, as compared to 33.9% in the prior year period. The gross margin rate excluding the acquisition and the impact of foreign exchange was 30.1%.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Combined selling, general and administrative expenses decreased to $196.4 million in the three months period ended September 30, 2023, as compared to $201.2 million in the three months period ended October 1, 2022. As a percentage of net sales, selling, general, and administrative expenses were 20.0% in the three months period ended September 30, 2023 as compared to 20.3% in the three months period ended October 1, 2022.

Selling, general and administrative expenses reflect increased costs of $6.4 million associated with acquisitions, including $1.5 million of intangible amortization expense. Selling, general and administrative expenses decreased primarily due to lower compensation costs, selling and marketing expenses and intangible amortization expense. Foreign exchange rates had an unfavorable impact of $2.5 million.

RESTRUCTURING EXPENSES.Restructuring expenses increased $2.1 million to $4.4 million for the three months period ended September 30, 2023, as compared to $2.3 million for the three months period ended October 1, 2022. Restructuring expenses in the three months period ended September 30, 2023 related primarily to headcount reductions and facility consolidations within the Residential Kitchen Equipment Group and Commercial Foodservice Group. Restructuring expenses in the three months period ended October 1, 2022 related primarily to headcount reductions and facility consolidations within the Residential Kitchen Equipment Group.

NON-OPERATING EXPENSES. Interest and deferred financing amortization costs were $31.1 million in the three months period ended September 30, 2023, as compared to $24.1 million in the prior year period primarily reflecting higher interest rates and borrowings levels on our current debt structure. Net periodic pension benefit (other than service costs) decreased $7.8 million to $2.1 million in the three months period ended September 30, 2023, as compared to $9.9 million in the prior year period related to the increase in discount rate used to calculate the interest cost. Other expense was $1.1 million in the three months period ended September 30, 2023, as compared to $8.5 million in the prior year period and consists mainly of foreign exchange gains and losses.

INCOME TAXES. A tax provision of $35.7 million, at an effective rate of 24.8%, was recorded during the three months period ended September 30, 2023, as compared to $34.7 million at an effective rate of 24.9%, in the prior year period. The effective tax rate for the three months period ended September 30, 2023 is lower than the comparable year rate primarily due to tax refunds, partially offset byan increase in the UK statutory income tax rate from 19% in 2022 to a 23.5% blended rate in 2023.

Nine Months Ended September 30, 2023 as compared to Nine Months Ended October 1, 2022

NET SALES. Net sales for the nine months period ended September 30, 2023 increased by $26.8 million, or 0.9%, to $3,028.0 million as compared to $3,001.2 million in the nine months period ended October 1, 2022. Net sales increased by $107.8 million, or 3.6%, 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 $81.0 million, or 2.7%, from the prior year period. The impact of foreign exchange rates on foreign sales translated into U.S. Dollars for the nine months period ended September 30, 2023 increased net sales by approximately $0.2 million. Excluding the impact of foreign exchange and acquisitions, sales decreased 2.7% for the nine months period ended September 30, 2023 as compared to the prior year period, including a net sales increase of 4.6% at the Commercial Foodservice Equipment Group, a net sales increase of 16.3% at the Food Processing Equipment Group and a net sales decrease of 27.4% at the Residential Kitchen Equipment Group.

•Net sales of the Commercial Foodservice Equipment Group increased by $127.7 million, or 7.2%, to $1,893.6 million in the nine months period ended September 30, 2023, as compared to $1,765.9 million in the prior year period. 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 $49.2 million during the nine months period ended September 30, 2023. Excluding the impact of acquisitions, net sales of the Commercial Foodservice Equipment Group increased $78.5 million, or 4.4%, as compared to the prior year period. Excluding the impact of foreign exchange and acquisitions, net sales increased $80.6 million, or 4.6%, at the Commercial Foodservice Equipment Group. Domestically, the company realized a sales increase of ~~$97.5~~$83.3 million, or ~~26.6%~~6.4%, to ~~$464.1~~$1,385.9 million, as compared to ~~$366.6~~$1,302.6 million in the prior year period. This includes an increase of ~~$30.4~~$20.7 million from ~~the~~ recent acquisitions. Excluding ~~the~~ acquisitions, the net increase in domestic sales was ~~$67.1~~$62.6 million, or ~~18.3%~~4.8%. The increase in domestic sales is related to ~~pricing increases~~higher shipments, product mix impacts, and ~~higher shipments.~~price increases. International sales increased ~~$14.7~~$44.4 million, or ~~10.1%~~9.6%, to ~~$159.6~~$507.7 million, as compared to ~~$144.9~~$463.3 million in the prior year period. This includes an increase of ~~$7.5~~$28.5 million from the recent acquisitions and a decrease of ~~$12.9~~$2.1 million related to the unfavorable impact of exchange rates. Excluding the impact of foreign exchange and acquisitions, the net sales increase in international sales was ~~$20.1~~$18.0 million, or ~~13.9%~~3.9%. The increase in international ~~sales~~revenues is related to improvements in market conditions, primarily in the ~~European~~Asia and Latin American markets.

•Net sales of the Food Processing Equipment Group increased by ~~$35.6~~$125.7 million, or ~~31.6%~~31.2%, to ~~$148.2~~$528.9 million in the ~~three~~nine months period ended ~~October 1, 2022,~~September 30, 2023, as compared to ~~$112.6~~$403.2 million in the prior year period. Net sales from the acquisitions of Proxaut, CP Packaging, ~~and~~ Colussi Ermes, Escher, and Filtration Automation, which were acquired on June 29, 2022, July 12, 2022, ~~and~~ July 27, 2022, November 10, 2022, and June 13, 2023, respectively, accounted for an increase of ~~$16.6~~$57.2 million during the ~~three~~nine months period ended ~~October 1, 2022.~~September 30, 2023. Excluding the impact of acquisitions, net sales of the Food Processing Equipment Group increased ~~$19.0~~$68.5 million, or ~~16.9%~~17.0%, as compared to the prior year period. Excluding the impact of foreign exchange and acquisitions, net sales increased ~~$24.4~~$65.9 million, or ~~21.7%~~16.3%, at the Food Processing Equipment Group. Domestically, the company realized a sales increase of ~~$19.9~~$57.1 million, or ~~23.6%~~19.2%, to ~~$104.3~~$354.9 million, as compared to ~~$84.4~~$297.8 million in the prior year period. This includes an increase of ~~$5.6~~$21.3 million from ~~the~~ recent acquisitions. International sales increased ~~$15.7~~$68.6 million, or ~~55.7%~~65.1%, to ~~$43.9~~$174.0 million, as compared to ~~$28.2~~$105.4 million in the prior year period. This includes an increase of ~~$11.0~~$35.9 million from the recent acquisitions and ~~a decrease~~an increase of ~~$5.4~~$2.6 million related to the ~~unfavorable~~favorable impact of exchange rates. Excluding the impact of foreign exchange and acquisitions, the net sales increase in international sales was ~~$10.1~~$30.1 million, or ~~35.8%~~28.6%. The increase in domestic and international sales reflects growth driven by both bakery and protein products.

•Net sales of the Residential Kitchen Equipment Group ~~increased~~decreased by ~~$27.6~~$226.6 million, or ~~14.3%~~27.2%, to ~~$221.0~~$605.5 million in the ~~three~~nine months period ended ~~October 1, 2022,~~September 30, 2023, as compared to ~~$193.4~~$832.1 million in the prior year period. 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 $34.2 million during the three months period ended October 1, 2022. Excluding the impact of the acquisitions, net sales of the Residential Kitchen Equipment Group decreased $6.6 million, or 3.4%, as compared to the prior year period. Excluding the impact of the acquisition of Trade-Wind, net sales decreased $228.0 million, or 27.4%. Excluding the impact of foreign exchange, ~~and acquisitions,~~ net sales ~~increased $4.4~~decreased $227.7 million, or ~~2.3%~~27.4%, at the Residential Kitchen Equipment Group. Domestically, the company realized a sales ~~increase~~decrease of ~~$32.6~~$167.9 million, or ~~28.8%~~29.8%, to ~~$145.8~~$395.2 million, as compared to ~~$113.2~~$563.1 million in the prior year period. Excluding the impact of acquisition, net sales of the Residential Kitchen Equipment Group decreased $168.7 million, or 30.0%, as compared to the prior year period. International sales decreased $58.7 million, or 21.8%, to $210.3 million, as compared to $269.0 million in the prior year period. This includes an increase of $20.1 million from the recent acquisitions. Excluding the acquisitions, the net increase in domestic sales was $12.5 million, or 11.0%. The increase in domestic sales reflects the strong demand for our premium appliance brands. International sales decreased $5.0 million, or 6.2%, to $75.2 million, as compared to $80.2 million in the prior year period. This includes an increase of $14.1 million from the recent acquisitions and a decrease of ~~$11.0~~$0.3 million related to the unfavorable impact of exchange rates. Excluding the impact of foreign exchange and ~~acquisitions,~~acquisition, the net sales decrease in international sales was ~~$8.1~~$59.0 million, or ~~10.1%~~21.9%. The decrease in domestic and international sales was primarily driven by challenging market conditions and higher inventory levels in the ~~European market.~~channel.

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GROSS PROFIT. Gross profit increased to ~~$365.2~~$1,147.3 million in the ~~three~~nine months period ended ~~October 1, 2022,~~September 30, 2023 as compared to ~~$299.6~~$1,056.5 million in the prior year period, primarily reflecting higher sales volumes ~~related to improvements in domestic market conditions~~at the Commercial Foodservice Equipment Group and ~~consumer demand.~~Food Processing Equipment Group. The impact of foreign exchange rates decreased gross profit by approximately ~~$11.4~~$1.1 million. The gross margin rate was ~~36.8%~~37.9% in the ~~three~~nine months period ended September 30, 2023 as compared to 35.2% in the nine months period ended October 1, 2022 ~~as compared to 36.6% in the prior year period.~~primarily reflecting higher sales volumes and improved product mix.

•Gross profit at the Commercial Foodservice Equipment Group increased by ~~$49.6~~$98.6 million, or ~~26.5%~~15.0%, to ~~$236.9~~$756.7 million in the ~~three~~nine months period ended ~~October 1, 2022,~~September 30, 2023, as compared to ~~$187.3~~$658.1 million in the prior year period. Gross profit from the acquisitions of ~~Imperial, Newton CFV,~~ Kloppenberg, Icetro, Marco, Flavor Burst, Blue Sparq, and ~~Icetro~~Terry increased gross profit by ~~$13.7~~$17.7 million. Excluding acquisitions, gross profit increased by ~~$35.9 million related to higher sales volumes.~~$80.9 million. The impact of foreign exchange rates decreased gross profit by approximately ~~$5.1~~$1.4 million. The gross margin rate increased to ~~38.0%~~40.0%, as compared to ~~36.6%~~37.3% in the prior year period related to higher sales volumes and improved product mix. The gross margin rate, excluding acquisitions and the impact of foreign exchange, was 40.1%.

•Gross profit at the Food Processing Equipment Group increased by $57.0 million, or 40.8%, to $196.8 million in the nine months period ended September 30, 2023, as compared to $139.8 million in the prior year period. Gross profit from the acquisitions of Proxaut, CP Packaging, Colussi Ermes, Escher, and Filtration Automation increased gross profit by $21.9 million. Excluding acquisitions, gross profit increased by $35.1 million. The impact of foreign exchange rates increased gross profit by approximately $0.4 million. The gross profit margin rate increased to 37.2%, as compared to 34.7% in the prior year period primarily related to improved product mix and acquisitions. The gross margin rate, excluding acquisitions and the impact of foreign exchange, was 37.2%.

•Gross profit at the Residential Kitchen Equipment Group decreased by $65.5 million, or 25.2%, to $194.4 million in the nine months period ended September 30, 2023, as compared to $259.9 million in the prior year period. The impact of foreign exchange rates decreased gross profit by approximately $0.1 million. The gross margin rate increased to 32.1%, as compared to 31.2% in the prior year period. The gross margin rate, excluding acquisitions and the impact of foreign exchange, was ~~38.1%~~32.1%.

•Gross profit ~~at the Food Processing Equipment Group increased by $11.9 million, or 28.4%, to $53.8 million in the three months period ended October 1, 2022, as compared to $41.9 million~~margins in the prior year period. Gross profit from the acquisitions of Proxaut, CP Packaging and Colussi Ermes increased gross profit by $4.7 million. Excluding acquisitions, gross profit increased by $7.2 million related to higher sales volumes. The impact of foreign exchange rates decreased gross profit by approximately $2.5 million. The gross profit margin rate decreased to 36.3%, as compared to 37.2% in the prior year period, which waswere negatively impacted by ~~acquisitions. The gross margin rate, excluding~~ acquisitions, ~~and the impact~~including $15.1 million of ~~foreign exchange, was 37.7%.~~

•Gross profit at the Residential Kitchen Equipment Group increased by $4.2 million, or 5.9%, to $74.9 million in the three months period ended October 1, 2022, as compared to $70.7 million in the prior year period. Gross profit from the acquisitions of Novy, Char-Griller, and Kamado Joe and Masterbuilt increased gross profit by $4.5 million. The impact of foreign exchange rates decreased gross profit by approximately $3.8 million. The gross margin rate decreased to 33.9%, as compared to 36.6% in the prior year period, which was negatively impacted by acquisitions. The gross margin rate, excluding acquisitions and the impact of foreign exchange, was 37.5%.acquisition related inventory step-up charges.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Combined selling, general and administrative expenses increased to ~~$201.2~~$615.4 million in the ~~three~~nine months period ended September 30, 2023, as compared to $596.8 million in the nine months period ended October 1, ~~2022, as compared to $175.4 million in the three months period ended October 2, 2021.~~2022. As a percentage of net sales, selling, general, and administrative expenses were 20.3% in the ~~three~~nine months period ended September 30, 2023, as compared to 19.9% in the nine months period ended October 1, ~~2022 as compared to 21.4% in the three months period ended October 2, 2021.~~2022.

Selling, general and administrative expenses reflect increased costs of ~~$19.6~~$28.1 million associated with acquisitions, including ~~$4.5~~$4.7 million of intangible amortization expense. Selling, general and administrative expenses ~~increased from~~decreased related to lower intangible amortization expense, partially offset by higher compensation costs and selling and ~~commissions~~marketing expenses. Foreign exchange rates had a favorable impact of ~~$5.4~~$0.4 million.

RESTRUCTURING EXPENSES. Restructuring expenses increased ~~$1.5~~$3.5 million to ~~$2.3~~$11.7 million ~~for~~in the ~~three~~nine months period ended September 30, 2023 from $8.2 million in the nine months period ended October 1, ~~2022, as compared to $0.8 million for the three months period ended October 2, 2021.~~2022. Restructuring expenses in the ~~three~~nine months period ended October 1, 2022 related primarily to headcount reductions and facility consolidations within the Residential Kitchen Equipment Group. Restructuring expenses in the three months period ended October 2, 2021September 30, 2023 related primarily to headcount reductions and facility consolidations within the Commercial Foodservice Equipment ~~Group.~~

~~NON-OPERATING EXPENSES~~. Interest and deferred financing amortization costs were $24.1 million in the three months period ended October 1, 2022, as compared to $13.2 million in the prior year period primarily reflecting higher interest rates and borrowings levels on our current debt structure. Net periodic pension benefit (other than service costs) decreased $1.5 million to $9.9 million in the three months period ended October 1, 2022, as compared to $11.4 million in the prior year period. Other expenses were $8.5 million in the three months period ended October 1, 2022, as compared to other income of $0.8 million in the prior year period and consists mainly of foreign exchange gains and losses.

~~INCOME TAXES~~. A tax provision of $34.7 million, at an effective rate of 24.9%, was recorded during the three months period ended October 1, 2022, as compared to $54.9 million at an effective rate of 23.8%, in the prior year period. The effective tax rate for the three months period ended October 1, 2022 is higher than the comparable prior year rate primarily due to higher non-deductible costs in 2022.

~~Nine Months Ended October 1, 2022 as compared to Nine Months Ended October 2, 2021~~

~~NET SALES~~. Net sales for the nine months period ended October 1, 2022 increased by $616.8 million, or 25.9%, to $3,001.2 million as compared to $2,384.4 million in the nine months period ended October 2, 2021. Net sales increased by $362.6 million, or 15.2%, 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 and Colussi Ermes. Excluding acquisitions, net sales increased $254.2 million, or 10.7%, from the prior year period. The impact of foreign exchange rates on foreign sales translated into U.S. Dollars for the nine months period ended October 1, 2022 decreased net sales by approximately $58.0 million, or 2.4%. Excluding the impact of foreign exchange and acquisitions, sales increased 13.1% for nine months period ended October 1, 2022 as compared to the prior year period, including a net sales increase of 15.3% at the Commercial Foodservice Equipment Group, a net sales increase of 9.0% at the Food Processing Equipment Group and ~~a net sales increase of 9.5% at the~~ Residential Kitchen Equipment Group.

•Net sales of the Commercial Foodservice Equipment Group increased by $275.6 million, or 18.4%, to $1,777.0 million in the nine months period ended October 1, 2022, as compared to $1,501.4 million in the prior year period. Net sales from the acquisitions of Imperial, Newton CFV, Kloppenberg and Icetro, which were acquired on September 24, 2021, November 16, 2021, April 25, 2022 and June 30, 2022, respectively, accounted for an increase of $72.8 million during the nine months period ended October 1, 2022. Excluding the impact of acquisitions, net sales of the Commercial Foodservice Equipment Group increased $202.8 million, or 13.5%, as compared to the prior year period. Excluding the impact of foreign exchange and acquisitions, net sales increased $230.1 million, or 15.3%, at the Commercial Foodservice Equipment Group. Domestically, the company realized a sales increase of $248.8 million, or 23.4%, to $1,313.3 million, as compared to $1,064.5 million in the prior year period. This includes an increase of $64.6 million from recent acquisitions. Excluding acquisitions, the net increase in domestic sales was $184.2 million, or 17.3%. The increase in domestic sales is related to improvements in market conditions and consumer demand. International sales increased $26.8 million, or 6.1%, to $463.7 million, as compared to $436.9 million in the prior year period. This includes an increase of $8.2 million from the recent acquisitions and a decrease of $27.3 million related to the unfavorable impact of exchange rates. Excluding the impact of foreign exchange and acquisitions, the net sales increase in international sales was $45.9 million, or 10.5%. The increase in international revenues 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 $36.9 million, or 10.4%, to $392.1 million in the nine months period ended October 1, 2022, as compared to $355.2 million in the prior year period. Net sales from the acquisitions of Proxaut, CP Packaging and Colussi Ermes, which were acquired on June 29, 2022, July 12, 2022 and July 27, 2022, respectively, accounted for an increase of $16.6 million during the nine months period ended October 1, 2022. Excluding the impact of acquisitions, net sales of the Food Processing Equipment Group increased $20.3 million, or 5.7%, as compared to the prior year period. Excluding the impact of foreign exchange and acquisitions, net sales increased $32.1 million, or 9.0%, at the Food Processing Equipment Group. Domestically, the company realized a sales increase of $27.4 million, or 10.6%, to $287.0 million, as compared to $259.6 million in the prior year period. This includes an increase of $5.6 million from recent acquisitions. The increase in domestic sales reflects growth driven by bakery and protein products. International sales increased $9.5 million, or 9.9%, to $105.1 million, as compared to $95.6 million in the prior year period. This includes an increase of $11.0 million from the recent acquisitions and a decrease of $11.8 million related to the unfavorable impact of exchange rates. Excluding the impact of foreign exchange and acquisitions, the net sales increase in international sales was $10.3 million, or 10.8%. The increase in international sales reflects growth primarily driven by protein products.

•Net sales of the Residential Kitchen Equipment Group increased by $304.3 million, or 57.7%, to $832.1 million in the nine months period ended October 1, 2022, as compared to $527.8 million in the prior year period. 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 $273.2 million during the nine months period ended October 1, 2022. Excluding the impact of acquisitions, net sales of the Residential Kitchen Equipment Group increased $31.1 million, or 5.9%, as compared to the prior year period. Excluding the impact of foreign exchange and acquisitions, net sales increased $50.0 million, or 9.5%, at the Residential Kitchen Equipment Group. Domestically, the company realized a sales increase of $228.0 million, or 68.0%, to $563.1 million, as compared to $335.1 million in the prior year period. This includes an increase of $175.3 million from recent acquisitions. Excluding acquisitions, the net increase in domestic sales was $52.7 million, or 15.7%. The increase in domestic sales reflects the strong demand for our premium appliance brands. International sales increased $76.3 million, or 39.6%, to $269.0 million, as compared to $192.7 million in the prior year period. This includes an increase of $97.9 million from the recent acquisitions and a decrease of $18.9 million related to the unfavorable impact of exchange rates. Excluding the impact of foreign exchange and acquisitions, the net sales decrease in international sales was $2.7 million, or 1.4%.

~~GROSS PROFIT~~. Gross profit increased to $1,056.5 million in the nine months period ended October 1, 2022 as compared to $879.2 million in the prior year period, primarily reflecting higher sales volumes related to improvements in domestic market conditions and consumer demand. The impact of foreign exchange rates decreased gross profit by approximately $22.7 million. The gross margin rate was 35.2% in the nine months period ended October 1, 2022 as compared to 36.9% in the nine months period ended October 2, 2021. Gross profit margins have been negatively impacted by acquisitions, including $17.3 million of acquisition related inventory step-up charges, along with rising costs of many raw materials and inputs, as well as higher labor rates and logistics costs.

•Gross profit at the Commercial Foodservice Equipment Group increased by $107.1 million, or 19.3%, to $661.6 million in the nine months period ended October 1, 2022, as compared to $554.5 million in the prior year period. Gross profit from the acquisitions of Imperial, Newton CFV, Kloppenberg and Icetro increased gross profit by $26.9 million. Excluding acquisitions, gross profit increased by $80.2 million related to higher sales volumes. The impact of foreign exchange rates decreased gross profit by approximately $10.6 million. The gross margin rate increased to 37.2%, as compared to 36.9% in the prior year period. The gross margin rate, excluding acquisitions and the impact of foreign exchange, was 37.3%.

•Gross profit at the Food Processing Equipment Group increased by $8.0 million, or 6.2%, to $136.3 million in the nine months period ended October 1, 2022, as compared to $128.3 million in the prior year period. Gross profit from the acquisitions of Proxaut, CP Packaging and Colussi Ermes increased gross profit by $4.8 million. Excluding acquisitions, gross profit increased by $3.2 million related to higher sales volumes. The impact of foreign exchange rates decreased gross profit by approximately $5.0 million. The gross profit margin rate decreased to 34.8%, as compared to 36.1% in the prior year period primarily related to acquisitions and product mix. The gross margin rate, excluding acquisitions and the impact of foreign exchange, was 35.2%.

•Gross profit at the Residential Kitchen Equipment Group increased by $63.6 million, or 32.4%, to $259.9 million in the nine months period ended October 1, 2022, as compared to $196.3 million in the prior year period. Gross profit from the acquisitions of Novy, Char-Griller, and Kamado Joe and Masterbuilt increased gross profit by $47.9 million. The impact of foreign exchange rates decreased gross profit by approximately $7.1 million. The gross margin rate decreased to 31.2%, as compared to 37.2% in the prior year period. Gross profit margins have been negatively impacted by acquisitions, including $15.1 million of acquisition related inventory step-up charges. The gross margin rate, excluding acquisitions and the impact of foreign exchange, was 37.9%.

~~SELLING, GENERAL AND ADMINISTRATIVE EXPENSES~~. Combined selling, general and administrative expenses increased to $596.8 million in the nine months period ended October 1, 2022, as compared to $496.0 million in the nine months period ended October 2, 2021. As a percentage of net sales, selling, general, and administrative expenses were 19.9% in the nine months period ended October 1, 2022, as compared to 20.8% in the nine months period ended October 2, 2021.

Selling, general and administrative expenses reflect increased costs of $73.8 million associated with acquisitions, including $22.4 million of intangible amortization expense. Selling, general and administrative expenses increased from compensation, selling and commissions expenses. Foreign exchange rates had a favorable impact of $10.7 million.

~~RESTRUCTURING EXPENSES~~.~~Restructuring expenses increased $5.6 million to $8.2 million in the nine months period ended October 1, 2022 from $2.6 million in the nine months period ended October 2, 2021.~~ Restructuring expenses in the nine months period ended October 1, 2022 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. ~~Restructuring expenses in the nine months period ended October 2, 2021 related primarily to headcount reductions and facility consolidations within the Commercial Foodservice Equipment Group.~~

NON-OPERATING EXPENSES. Interest and deferred financing amortization costs were ~~$62.6~~$92.1 million in the nine months period ended ~~October 1, 2022,~~September 30, 2023, as compared to ~~$43.5~~$62.6 million in the prior year period, reflecting the increase in interest rates and borrowing levels under our current credit facility. Net periodic pension benefit (other than service costs) decreased ~~$2.1~~$25.3 million to ~~$32.2~~$6.9 million in the nine months period ended ~~October 1, 2022,~~September 30, 2023, as compared to ~~$34.3~~$32.2 million in the prior year ~~period.~~period related to the increase in discount rate used to calculate the interest cost. Other ~~income~~expense was ~~$18.5~~$2.6 million in the nine months period ended ~~October 1, 2022,~~September 30, 2023, as compared to ~~other income of $1.4~~$18.5 million in the prior year period and consists mainly of foreign exchange gains and losses.

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INCOME TAXES. A tax provision of ~~$99.3~~$107.9 million, at an effective rate of ~~24.7%~~24.9%, was recorded during the nine months period ended ~~October 1, 2022,~~September 30, 2023, as compared to ~~$97.7~~$99.3 million at an effective rate of ~~20.2%~~24.7%, in the prior year period. The effective tax rate for the nine months period ended ~~October 1, 2022~~September 30, 2023 is higher than the comparable ~~prior~~ year rate primarily due to ~~discrete tax benefits recorded~~an increase in ~~2021 for a deferred tax benefit for~~ the ~~enacted~~ UK statutory income tax rate ~~change~~ from 19% in 2022 to ~~25% and tax benefits from amended U.S. tax returns. When excluding the discrete tax adjustments, the 2021~~a 23.5% blended rate ~~was approximately 24.0%.~~

in 2023.

Financial Condition and Liquidity

~~During the nine months ended October 1, 2022,~~

Total cash and cash equivalents ~~decreased~~increased by ~~$35.5~~$5.2 million to ~~$144.9 million from $180.4~~$167.2 million at ~~January~~September 30, 2023 from $162.0 million at October 1, 2022. Total debt ~~increased~~decreased to $2.6 billion at September 30, 2023 from $2.7 billion at ~~October 1, 2022 from $2.4 billion at January 1,~~December 31, 2022.

OPERATING ACTIVITIES. Net cash provided by operating activities ~~was~~after changes in assets and liabilities amounted to $373.1 million as compared to $173.4 million ~~for~~in the ~~nine months ended October 1, 2022, compared to $346.0 million for the nine months ended October 2, 2021.~~

prior year.

During the nine months period ended ~~October 1, 2022,~~September 30, 2023, working capital changes ~~continued to have a meaningful impact on~~meaningfully impacted operating cash ~~flow,~~flows primarily driven by ~~increased~~decreased inventory levels of ~~$214.0~~$67.0 million, ~~related~~a decrease of $86.6 million in accrued expenses and other liabilities including impacts from the ~~seasonality~~timing of ~~acquired businesses, efforts to mitigate supply chain risks~~payments made for taxes, various customer programs and ~~the inflationary impacts on inventory.~~incentive programs and a decrease in accounts payable of $49.2 million.

INVESTING ~~ACTIVITIES~~.ACTIVITIES. During the nine months period ended ~~October 1, 2022,~~September 30, 2023, net cash used for investing activities amounted to ~~$257.9~~$139.2 million. Cash used to fund acquisitions and investments amounted to ~~$206.3 million.~~$67.8 million. Additionally, ~~$50.9~~ $69.6 million was expended, primarily for ~~additions and~~ upgrades of production equipment and manufacturing facilities.

FINANCING ACTIVITIES. Net cash flows ~~provided by~~used for financing activities ~~were $72.6~~amounted to $225.8 million during the nine months period ended ~~October 1, 2022.~~September 30, 2023. The company’s borrowing activities during ~~the nine months ended October 1, 2022~~2023 included ~~$354.3~~$146.5 million of net proceeds under its Credit Facility. Additionally, the company repurchased ~~$239.7~~$74.5 million of Middleby common shares during ~~the nine months ended October 1, 2022.~~2023. This was comprised of ~~$15.7~~$19.5 million to repurchase ~~89,459~~126,550 shares of Middleby common stock that were surrendered to the company ~~by employees in lieu of cash payment~~ for withholding taxes related to restricted stock ~~vesting~~vestings and ~~$224.0~~$55.0 million used to repurchase ~~1,365,598~~397,738 shares of its common stock under a repurchase program.

At ~~October 1, 2022,~~September 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.

Recently Issued Accounting Standards

See Part I, Item 1, Notes to Condensed Consolidated Financial Statements, Note 4 - Recently Issued Accounting Standards, of this Quarterly Report on Form 10-Q.

~~Cybersecurity Governance~~

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. The company has not experienced a material cybersecurity or information security breach in the last three years.

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 (more frequently than annually) from senior management on cybersecurity and information security matters. The company maintains a program, 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 cyber incident response plan that provides controls and procedures for timely and accurate reporting of any material cybersecurity incident.

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 the company's consolidated financial statements. There have been no changes in the company's critical accounting policies, which include revenue recognition, inventories, goodwill and indefinite-life intangibles, convertible debt, pensions benefits, and income taxes, as discussed in the company's Annual Report on Form 10-K for the year ended ~~January 1,~~December 31, 2022 (the ~~“2021~~“2022 Annual Report on Form 10-K”).

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

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:


Twelve Month Period coinciding with the end of the company's Fiscal Third Quarter	Twelve Month Period coinciding with the end of the company's Fiscal Third Quarter	Variable Rate Debt		Twelve Month Period coinciding with the end of the company's Fiscal Third Quarter	Variable Rate Debt

2023		$	44,664
2024	2024	42,722		2024	$	44,330
2025	2025	779,705		2025	784,303
2026	2026	42,637		2026	43,388
2027 and thereafter		1,828,261
2027				2027	1,705,112
2028 and thereafter				2028 and thereafter	3,093
		$	2,737,989		$	2,580,226

The company is exposed to interest rate risk on its floating-rate debt. The company has entered into interest rate swaps to fix the interest rate applicable to certain of its variable-rate debt. The agreements ~~swap~~swapped one-month LIBOR for fixed rates. In February 2022, the company entered into an additional floating-to-fixed interest rate swap agreement that uses a daily SOFR in lieu of ~~LIBOR.The~~LIBOR. In April 2023, all outstanding LIBOR swap agreements were amended to one month term SOFR. 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 ~~October 1, 2022,~~September 30, 2023, the fair value of these instruments was an asset of ~~$68.0~~$62.2 million. The change in fair value of these swap agreements in the first nine months of ~~2022~~2023 was a ~~gain~~loss of ~~$63.6~~$2.1 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.

InThe company has Convertible Notes that were issued in August 2020, ~~the company issued $747.5 million aggregate principal amount~~which carry a fixed annual interest rate of ~~Convertible Notes in a private offering pursuant to~~1.00%. As such, the ~~Indenture. The~~ company does not have economic interest rate exposure ason the Convertible ~~Notes have a fixed annual rate of 1.00%.~~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 foreign currency forward, foreign exchange swaps and option purchase and sales contracts 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 net 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. The fair value of the forward and option contracts was a loss of ~~$4.4~~$0.6 million at the end of the third quarter of ~~2022.~~2023.

3631

Item 4. Controls and Procedures

The company maintains disclosure controls and procedures 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.

As of ~~October 1, 2022,~~September 30, 2023, 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 company's disclosure controls and procedures. 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.

During the quarter ended ~~October 1, 2022,~~September 30, 2023, there has been no change in the company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting.

3732

PART II. OTHER INFORMATION

The company was not required to report the information pursuant to Items 1 through 6 of Part II of Form 10-Q for the nine months ended ~~October 1, 2022,~~September 30, 2023, except as follows:

Item 2. Unregistered Sales of Equity Securities, ~~and~~ Use of Proceeds, and Issuer Purchases of Equity Securities

c) 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)

July ~~3, 2022~~2, 2023 to July ~~30, 2022~~29, 2023

—

~~2,469,737~~1,883,636

July ~~31, 2022~~30, 2023 to August ~~27, 2022~~26, 2023

—

~~2,469,737~~1,883,636

August ~~28, 2022~~27, 2023 to ~~October 1, 2022~~September 30, 2023

—

~~2,469,737~~1,883,636

Quarter ended ~~October 1, 2022~~September 30, 2023

—

~~2,469,737~~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 ~~October 1, 2022,~~September 30, 2023, the total number of shares authorized for repurchase under the program is 5,000,000. As of ~~October 1, 2022, 2,530,263~~September 30, 2023, 3,116,364 shares had been purchased under the stock repurchase program and ~~2,469,737~~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.

3833

Item 6. Exhibits


Exhibits:

Exhibit 31.1 –			Rule 13a-14(a)/15d -14(a) Certification of the Chief Executive Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 31.2 –			Rule 13a-14(a)/15d -14(a) Certification of the Chief Financial Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.1 –			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 32.2 –			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 101 –			Financial statements on Form 10-Q for the quarter ended ~~October 1, 2022,~~September 30, 2023, filed on November ~~10, 2022,~~9, 2023, formatted in Inline Extensive Business Reporting Language (iXBRL); (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of earnings, (iii) condensed statements of cash flows, (iv) notes to the condensed consolidated financial statements.

Exhibit 104 –			Cover Page Interactive Data File (formatted as Inline Extensive Business Reporting Language (iXBRL) and contained in Exhibit 101).

3934

SIGNATURE

Pursuant to the requirements 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.

THE MIDDLEBY CORPORATION

(Registrant)

Date:

November ~~10, 2022~~9, 2023

By:

/s/ Bryan E. Mittelman

Bryan E. Mittelman

Chief Financial Officer

4035


	Preliminary Opening Balance Sheet		Measurement Period Adjustments		Adjusted Opening Balance Sheet
Cash	$	16,152	$	—	$	16,152

Current assets	23,762		234		23,996
Property, plant and equipment	17,058		4,383		21,441
Goodwill	142,741		(6,938)		135,803
Other intangibles	126,557		4,149		130,706

Other assets	26		173		199

Current liabilities	(23,440)		182		(23,258)

Long-term deferred tax liability	(33,918)		(2,072)		(35,990)
Other non-current liabilities	(1,930)		(111)		(2,041)






Net assets acquired and liabilities assumed	$	267,008	$	—	$	267,008