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What changed in MIDDLEBY Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MIDDLEBY Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+223 added−206 removedSource: 10-K (2023-03-01) vs 10-K (2022-03-02)

Top changes in MIDDLEBY Corp's 2023 10-K

223 paragraphs added · 206 removed · 171 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

53 edited+14 added−2 removed53 unchanged
Biggest changeCommercial Foodservice Equipment Group • January 2020: The company completed its acquisition of the RAM fry dispenser product line ("RAM"), a leader in automated fry dispensers, located in Red Wing, Minnesota. • February 2020: The company completed its acquisition of all of the capital stock of DBT Holdings, LLC ("Deutsche"), a leader in beverage brewing and processing systems located in Charlotte, North Carolina. • December 2020: The company completed its acquisition of all of the capital stock of MEP FMS Holdings, LLC ("Wild Goose"), a leader in the craft beer industry focused on providing the best canning and bottling integrity in the industry, located in Louisville, Colorado and Venice, Florida. • December 2020: The company completed its acquisition of the properties and assets used to conduct the business of United Foodservice Equipment Limited, a business that purchases and sells foodservice equipment located in Hong Kong, and its affiliate, Zhuhai United Foodservice Equipment Limited (collectively, "United Foodservice Equipment Zhuhai"), a business that manufactures and sells foodservice equipment located in China. 2 • September 2021: The company completed its acquisition of all of the capital stock of Imperial Commercial Cooking Equipment ("Imperial"), a manufacturer of ranges, fryers, ovens, countertop equipment, and other specialty cooking products for the commercial kitchen, located in Corona, California. • November 2021: The company completed its acquisition of all of the assets of Gate CFV Solutions, Inc. and Newton CFV, LLC ("Newton CFV"), a business that manufactures and sells valves for beverage dispensing and other applications utilizing patented CFV technology that provides constant pressure, flow and ratio control, located in Sebastian, Florida.
Biggest changeCommercial Foodservice Equipment Group • September 2021: The company completed its acquisition of all of the capital stock of Imperial Commercial Cooking Equipment ("Imperial"), a manufacturer of ranges, fryers, ovens, countertop equipment, and other specialty cooking products for the commercial kitchen, located in Corona, California. • November 2021: The company completed its acquisition of all of the assets of Gate CFV Solutions, Inc. and Newton CFV, LLC ("Newton CFV"), a business that manufactures and sells valves for beverage dispensing and other applications utilizing patented CFV technology that provides constant pressure, flow and ratio control, located in Sebastian, Florida. • April 2022: The company completed its acquisition of all of the assets of Kloppenberg LLC ("Kloppenberg"), a manufacturer of ice bins, dispensers, carts, and ice transportation systems, located in Englewood, Colorado. • June 2022: The company completed its acquisition of all of the capital stock of Icetro Co., Ltd.
The company maintains a substantial amount of service parts at each of its manufacturing operations and distribution operations to provide for quick ship of parts to service agents and end-user customers when necessary. Internationally, the company has a network of company owned and independent distributors that provide sales and technical service support in their respective markets.
The company maintains a substantial amount of service parts at each of its manufacturing operations and distribution operations to provide for quick ship of parts to service agents and end-user customers when necessary. 6 Internationally, the company has a network of company owned and independent distributors that provide sales and technical service support in their respective markets.
Products manufactured by the company are tested prior to shipment to ensure compliance with company standards. Sources of Supply The company purchases its raw materials and component parts from a number of suppliers. The majority of the company’s material purchases are standard commodity-type materials, such as stainless steel, electrical components and hardware.
Products manufactured by the company are tested prior to shipment to ensure compliance with company standards. 7 Sources of Supply The company purchases its raw materials and component parts from a number of suppliers. The majority of the company’s material purchases are standard commodity-type materials, such as stainless steel, electrical components and hardware.
The company strongly believes that business success is a direct correlation of its reputation for fairness and integrity. Accordingly, it is essential that the company’s board members and employees practice the highest standards of conduct and professionalism in any interactions with stakeholders including customers, creditors, stockholders, suppliers and other employees. 10
The company strongly believes that business success is a direct correlation of its reputation for fairness and integrity. Accordingly, it is essential that the company’s board members and employees practice the highest standards of conduct and professionalism in any interactions with stakeholders including customers, creditors, stockholders, suppliers and other employees.
In the international markets, foodservice equipment manufacturers have been experiencing growth due to expanding international economies and increased opportunity for expansion by U.S. chains into developing regions. The company believes that the worldwide commercial foodservice equipment market has sales in excess of $35.0 billion.
In the international markets, foodservice equipment manufacturers have been experiencing growth due to expanding international economies and increased opportunity for expansion by U.S. chains into developing regions. 3 The company believes that the worldwide commercial foodservice equipment market has sales in excess of $35.0 billion.
Through a commitment to a diverse and engaging culture, the company is able to build a platform that promotes equal opportunities for advancement for everyone. 9 Employee Safety The company is dedicated to providing a safe and healthy workplace by operating in accordance with established health and safety protocols.
Through a commitment to a diverse and engaging culture, the company is able to build a platform that promotes equal opportunities for advancement for everyone. Employee Safety The company is dedicated to providing a safe and healthy workplace by operating in accordance with established health and safety protocols.
The company estimates demand for food processing equipment is in excess of $55.0 billion worldwide. Residential Kitchen Equipment Industry The company’s end-users include customers with high-end residential kitchens as well as retail dealers of residential cooking equipment.
The company estimates demand for food processing equipment is in excess of $55.0 billion worldwide. 4 Residential Kitchen Equipment Industry The company’s end-users include customers with high-end residential kitchens as well as retail dealers of residential cooking equipment.
The company's annual reports on Form 10-K, including this Form 10-K, as well as the company's quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports are available, free of charge, on the company's internet website, www.middleby.com .
The company's annual reports on Form 10-K, including this Form 10-K, as well as the company's quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports are available, free of charge, on the company's website, www.middleby.com .
Among the company's major competitors to the Commercial Foodservice Equipment Group are the Ali Group S.r.l.; Duke Manufacturing; AB Electrolux; Haier Group; Hoshizaki America, Inc.; Hobart Corporation and Vulcan-Hart, subsidiaries of Illinois Tool Works Inc.; Marmon Foodservice Technologies, a Bershire Hathaway Company; Midea Group; Panasonic Corporation; Rational AG; SMEG S.p.A.; and Welbilt, Inc.
Among the company's major competitors to the Commercial Foodservice Equipment Group are the Ali Group S.r.l.; Duke Manufacturing; AB Electrolux; Haier Group; Hoshizaki America, Inc.; Hobart Corporation and Vulcan-Hart, subsidiaries of Illinois Tool Works Inc.; Marmon Foodservice Technologies, a Berkshire Hathaway Company; Midea Group; Panasonic Corporation; Rational AG; SMEG S.p.A.; and Welbilt, Inc.
Macro-economic factors such as GDP growth, employment rates, inflation and consumer confidence, which impact the overall economy, impact the residential kitchen equipment industry and cause variability in the revenues at this segment. The residential kitchen appliance industry is estimated to be in excess of $260 billion worldwide.
Macro-economic factors such as GDP growth, employment rates, inflation, interest rates and consumer confidence, which impact the overall economy, impact the residential kitchen equipment industry and cause variability in the revenues at this segment. The residential kitchen appliance industry is estimated to be in excess of $260.0 billion worldwide.
Acquisition Strategy The company has pursued a strategy to acquire and assemble a leading portfolio of brands and technologies for each of its three business segments. Over the past two years, the company has completed nine acquisitions to add to its portfolio of brands and technologies of the Commercial Foodservice Equipment Group and the Residential Kitchen Equipment Group.
Acquisition Strategy The company has pursued a strategy to acquire and assemble a leading portfolio of brands and technologies for each of its three business segments. Over the past two years, the company has completed seventeen acquisitions to add to its portfolio of brands and technologies of the Commercial Foodservice Equipment Group and the Residential Kitchen Equipment Group.
At its Windsor, California facility, the company has a union contract with the Sheet Metal Workers International Association that expires on December 31, 2023. At its Elgin, Illinois facility, the company has a union contract with the International Brotherhood of Teamsters that expires on July 31, 2022.
At its Windsor, California facility, the company has a union contract with the Sheet Metal Workers International Association that expires on December 31, 2023. At its Elgin, Illinois facility, the company has a union contract with the International Brotherhood of Teamsters that expires on July 31, 2025.
The company has a commitment to build its workforce from diverse backgrounds, experiences and talents among race, religion, language, nationality, disability, age and gender. Through our diverse workforce the company is able to attract the best talent, which allows better alignment with customers and creative and efficient development of new products for the marketplace.
The company has a commitment to build its workforce from diverse backgrounds, experiences and talents among race, religion, language, nationality, disability, age and gender. Through our diverse workforce, the company is well-positioned to attract the best talent, which allows better alignment with customers and creative and efficient development of new products for the marketplace.
The kitchen has been the main area in which consumers have invested the most money over the past several decades to increase the personal satisfaction and the value of their home. Other important factors which affect the market size and growth include the level of new home starts, increase in home renovations and general macro-economic factors.
The kitchen, both indoors and out, has been the main area in which consumers have invested the most money over the past several decades to increase the personal satisfaction and the value of their home. Other important factors which affect the market size and growth include the level of new home starts, increase in home renovations and general macro-economic factors.
As a global corporation, the company embraces and celebrates differences and endeavors to cultivate an environment where diversity and inclusion are core values of the organization. A Focus on Ethics The company is dedicated to promoting integrity, honesty, and professionalism in all of the business activities within the company.
As a global corporation, the company embraces and celebrates differences among our employees and endeavors to cultivate an environment where diversity and inclusion are core values of the organization. A Focus on Ethics The company is dedicated to promoting integrity, honesty, and professionalism in all of the business activities within the company.
The company also provides a comprehensive portfolio of complementary food preparation equipment such as tumblers, massagers, grinders, slicers, reduction and emulsion systems, mixers, blenders, formers, battering equipment, breading equipment, seeding equipment, water cutting systems, food presses, food suspension equipment, filling and depositing solutions and forming equipment, as well as a variety of automated loading and unloading systems, food safety, food handling, freezing, defrosting and packaging equipment.
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.
These products are sold and marketed under a portfolio of twenty-two brands, including AGA, AGA Cookshop, Brava, Char-Griller, EVO, Kamado Joe, La Cornue, Leisure Sinks, Lynx, Marvel, Masterbuilt, Mercury, Novy, Rangemaster, Rayburn, Redfyre, Sedona, Stanley, TurboChef, U-Line, Varimixer and Viking.
These products are sold and marketed under a portfolio of twenty-three brands, including AGA, AGA Cookshop, Brava, Char-Griller, EVO, Kamado Joe, La Cornue, Leisure Sinks, Lynx, Marvel, Masterbuilt, Mercury, Novy, Rangemaster, Rayburn, Redfyre, Sedona, Ss Brewtech, Stanley, TurboChef, U-Line, Varimixer and Viking.
At its Algona, Iowa facility, the company has a union contract with the United Food and Commercial Workers that expires on December 31, 2022. Management believes that the relationships between employees, unions and management are good. Residential Kitchen Equipment Group As of January 1, 2022, 2,902 persons were employed within the Residential Kitchen Equipment Group.
At its Algona, Iowa facility, the company has a union contract with the United Food and Commercial Workers that expires on December 31, 2026. Management believes that the relationships between employees, unions and management are good. Residential Kitchen Equipment Group As of December 31, 2022, 2,581 persons were employed within the Residential Kitchen Equipment Group.
Through its broad line of products, the company is able to deliver a wide array of food preparation, thermal processing and slicing/packaging solutions to service a variety of food processing requirements demanded by its customers.
Through its broad line of products, the company is able to deliver a wide array of food preparation, thermal processing, slicing/packaging, facility automation and equipment sanitation solutions to service a variety of food processing requirements demanded by its customers.
Included in these totals were 703 individuals employed outside of the United States, of which 411 were management, sales, administrative and engineering personnel and 292 were hourly production non-union workers. At its Lodi, Wisconsin facility, the company has a contract with the International Association of Bridge, Structural, Ornamental and Reinforcing Ironworkers that expires on December 31, 2024 .
Included in these totals were 1,070 individuals employed outside of the United States, of which 617 were management, sales, administrative and engineering personnel and 453 were hourly production non-union workers. At its Lodi, Wisconsin facility, the company has a contract with the International Association of Bridge, Structural, Ornamental and Reinforcing Ironworkers that expires on December 31, 2024 .
The company's leading portfolio of trade names of its Commercial Foodservice Equipment Group include Anets, APW Wyott, Bakers Pride, Beech, BKI, Blodgett, Blodgett Combi, Bloomfield, Britannia, Carter-Hoffmann, Celfrost, Concordia, CookTek, Crown, CTX, Desmon, Deutsche Beverage, Doyon, Eswood, EVO, Firex, Follett, Frifri, Globe, Goldstein, Holman, Houno, IMC, Imperial, Induc, Ink Kegs, Inline Filling Systems, Jade, JoeTap, Josper, L2F, Lang, Lincat, MagiKitch’n, Market Forge, Marsal, Meheen, Middleby Marshall, MPC, Newton CFV, Nieco, Nu-Vu, PerfectFry, Pitco, QualServ, RAM, Southbend, Ss Brewtech, Star, Starline, Sveba Dahlen, Synesso, Tank, Taylor, Thor, Toastmaster, TurboChef, Ultrafryer, Varimixer, Wells, Wild Goose and Wunder-Bar.
The company's leading portfolio of trade names of its Commercial Foodservice Equipment Group include Anets, APW Wyott, Bakers Pride, Beech, BKI, Blodgett, Blodgett Combi, Bloomfield, Britannia, Carter-Hoffmann, Celfrost, Concordia, CookTek, Crown, CTX, Desmon, Deutsche Beverage, Doyon, Eswood, EVO, Firex, Follett, Frifri, Globe, Goldstein, Holman, Houno, Hydra Rinse, Icetro, IMC, Imperial, Induc, Inline Filling Systems, Jade, JoeTap, Josper, Kloppenberg, L2F, Lang, Lincat, Marco, MagiKitch’n, Market Forge, Marsal, Meheen, Middleby Marshall, MPC, Newton CFV, Nieco, Nu-Vu, Perfect Fry, Pitco, Powerhouse Dynamics, QualServ, RAM, Southbend, Ss Brewtech, Star, Starline, Sveba Dahlen, Synesso, Tank, Taylor, Thor, Toastmaster, TurboChef, U-Line, Ultrafryer, Varimixer, Wells, Wild Goose Filling and Wunder-Bar.
These acquisitions have added twelve brands to the Middleby portfolio and positioned the company as a leading provider of equipment in each respective industry. Significant acquisitions included Novy and Kamado Joe and Masterbuilt, acquired for a purchase price of $250.9 million and $400.7 million, net of cash acquired, respectively.
These acquisitions have added fourteen brands to the Middleby portfolio and positioned the company as a leading provider of equipment in each respective industry. Significant acquisitions included Novy and Kamado Joe and Masterbuilt, acquired for a purchase price of $250.9 million and $403.6 million, net of cash acquired, respectively.
The market potential for such equipment has continued to broaden due to an increase in interest from the consumer to have professionally styled appliances with commercial inspired, higher performing features in their home.
The market potential for such equipment has continued to broaden due to an increase in interest from the consumer to have professionally styled appliances with commercial inspired, higher performing features in their home as well as their outdoor entertaining space.
This food processing equipment is marketed under a portfolio of twenty-one brands, including Alkar, Armor Inox, Auto-Bake, Baker Thermal Solutions, Burford, Cozzini, CV-Tek, Danfotech, Drake, Glimek, Hinds-Bock, Maurer-Atmos, MP Equipment, Pacproinc, RapidPak, Scanico, Spooner Vicars, Stewart Systems, Sveba Dahlen, Thurne and Ve.Ma.C.
This food processing equipment is marketed under a portfolio of twenty-six brands, including Alkar, Armor Inox, Auto-Bake, Baker Thermal Solutions, Burford, Colussi Ermes, Cozzini, CV-Tek, Danfotech, Drake, Escher, Glimek, Hinds-Bock, Key-Log, Maurer-Atmos, MP Equipment, Pacproinc, Proxaut, RapidPak, Scanico, Spooner Vicars, Stewart Systems, Sveba Dahlen, Thurne, Ve.Ma.C., and Visionpak.
This commercial foodservice equipment is marketed under a portfolio of sixty-eight brands, including Anets, APW Wyott, Bakers Pride, Beech, BKI, Blodgett, Blodgett Combi, Bloomfield, Britannia, Carter-Hoffmann, Celfrost, Concordia, CookTek, Crown, CTX, Desmon, Deutsche Beverage, Doyon, Eswood, EVO, Firex, Follett, Frifri, Globe, Goldstein, Holman, Houno, IMC, Imperial, Induc, Ink Kegs, Inline Filling Systems, Jade, JoeTap, Josper, L2F, Lang, Lincat, MagiKitch’n, Market Forge, Marsal, Meheen, Middleby Marshall, MPC, Newton CFV, Nieco, Nu-Vu, PerfectFry, Pitco, QualServ, RAM, Southbend, Ss Brewtech, Star, Starline, Sveba Dahlen, Synesso, Tank, Taylor, Thor, Toastmaster, TurboChef, Ultrafryer, Varimixer, Wells, Wild Goose and Wunder-Bar.
This commercial foodservice equipment is marketed under a portfolio of seventy-two brands, including Anets, APW Wyott, Bakers Pride, Beech, BKI, Blodgett, Blodgett Combi, Bloomfield, Britannia, Carter-Hoffmann, Celfrost, Concordia, CookTek, Crown, CTX, Desmon, Deutsche Beverage, Doyon, Eswood, EVO, Firex, Follett, Frifri, Globe, Goldstein, Holman, Houno, Hydra Rinse, Icetro, IMC, Imperial, Induc, Inline Filling Systems, Jade, JoeTap, Josper, Kloppenberg, L2F, Lang, Lincat, Marco, MagiKitch’n, Market Forge, Marsal, Meheen, Middleby Marshall, MPC, Newton CFV, Nieco, Nu-Vu, Perfect Fry, Pitco, Powerhouse Dynamics, QualServ, RAM, Southbend, Ss Brewtech, Star, Starline, Sveba Dahlen, Synesso, Tank, Taylor, Thor, Toastmaster, TurboChef, U-Line, Ultrafryer, Varimixer, Wells, Wild Goose Filling and Wunder-Bar.
Corporate As of January 1, 2022, 51 persons were employed at the corporate office. Employee Advancement The company believes offering opportunities for career development within the company is integral to building and retaining an outstanding workforce. The company is dedicated to the professional development of all employees.
Corporate As of December 31, 2022, 63 persons were employed at the corporate office. 9 Employee Advancement The company believes offering opportunities for career development within the company is integral to building and retaining an outstanding workforce. The company is dedicated to the professional development of all employees.
In the international markets, the company competes with U.S. manufacturers and numerous global and local competitors. 6 The company believes that it is one of the largest multiple-line manufacturers of commercial kitchen, food processing and residential kitchen equipment in the U.S. and worldwide although some of its competitors are units of operations that are larger than the company and possess greater financial and personnel resources.
The company believes that it is one of the largest multiple-line manufacturers of commercial kitchen, food processing and residential kitchen equipment in the U.S. and worldwide although some of its competitors are units of operations that are larger than the company and possess greater financial and personnel resources.
Customers include several large international food processing companies, which account for a significant portion of the revenues of this business segment, although none of which is greater than 10% of net sales.
Food Processing Equipment Industry The company's customers include a diversified base of leading food processors. Customers include several large international food processing companies, which account for a significant portion of the revenues of this business segment, although none of which is greater than 10% of net sales.
The Commercial Foodservice Equipment Group manufactures its products in twenty-two domestic and seventeen international production facilities. The Food Processing Equipment Group manufactures its products in eleven domestic and six international production facilities. The Residential Kitchen Equipment Group manufactures its products in six domestic and five international production facilities. See Item 2.
The Commercial Foodservice Equipment Group manufactures its products in twenty-three domestic and twenty international production facilities. The Food Processing Equipment Group manufactures its products in twelve domestic and nine international production facilities. The Residential Kitchen Equipment Group manufactures its products in six domestic and five international production facilities. See Item 2.
Included in these totals were 2,465 individuals employed outside of the United States, of which 1,156 were management, sales, administrative and engineering personnel, 1,163 were hourly production non-union workers and 146 were hourly production union workers, who participate in an employee cooperative.
Included in these totals were 2,718 individuals employed outside of the United States, of which 1,374 were management, sales, administrative and engineering personnel, 1,199 were hourly production non-union workers and 145 were hourly production union workers, who participate in an employee cooperative.
All other acquisitions were acquired for an aggregate purchase price totaling $430.5 million, net of cash acquired.
All other acquisitions were acquired for an aggregate purchase price totaling $598.4 million, net of cash acquired.
The company believes that continuing growth in demand for foodservice equipment will result from the development of new restaurant concepts in the U.S. and the expansion of U.S. and foreign chains into international markets, the replacement and upgrade of existing equipment and new equipment requirements resulting from menu changes, menu diversity and consumer food trends. 3 Food Processing Equipment Industry The company's customers include a diversified base of leading food processors.
The company believes that continuing growth in demand for foodservice equipment will result from the development of new restaurant concepts in the U.S. and the expansion of U.S. and foreign chains into international markets, the replacement and upgrade of existing equipment and new equipment requirements resulting from menu changes, menu diversity and consumer food trends.
Of this amount, 1,153 were management, administrative, sales, engineering and supervisory personnel and 1,749 were hourly production workers. Included in these totals were 1,352 individuals employed outside of the United States, of which 542 were management, sales, administrative and engineering personnel and 810 were hourly non-union production workers. Management believes that the relationships between employees and management are good.
Of this amount, 1,158 were management, administrative, sales, engineering and supervisory personnel and 1,423 were hourly production workers. Included in these totals were 1,208 individuals employed outside of the United States, of which 567 were management, sales, administrative and engineering personnel and 641 were hourly non-union production workers. Management believes that the relationships between employees and management are good.
Management believes that the relationships between employees, unions and management are good. Food Processing Equipment Group As of January 1, 2022, 1,593 persons were employed within the Food Processing Equipment Group. Of this amount, 831 were management, administrative, sales, engineering and supervisory personnel; 633 were hourly production non-union workers; and 129 were hourly production union members.
Management believes that the relationships between employees, unions and management are good. Food Processing Equipment Group As of December 31, 2022, 2,068 persons were employed within the Food Processing Equipment Group. Of this amount, 1,080 were management, administrative, sales, engineering and supervisory personnel; 844 were hourly production non-union workers; and 144 were hourly production union members.
The company in certain cases offers incentive based financial programs to invest in local marketing activities with these sales partners. 5 Services and Product Warranty The company is an industry leader in equipment installation programs and after-sales support and service. The company provides a warranty on its products typically for a one-year period and in certain instances greater periods.
Services and Product Warranty The company is an industry leader in equipment installation programs and after-sales support and service. The company provides a warranty on its products typically for a one-year period and in certain instances greater periods.
Backlog Commercial Foodservice Equipment Group The backlog of orders for the Commercial Foodservice Equipment Group was $881.9 million at January 1, 2022, most all of which is expected to be filled during 2022. The Commercial Foodservice Equipment Group's backlog was $238.2 million at January 2, 2021. The acquired Imperial and Newton CFV businesses accounted for $16.3 million of the backlog.
Backlog Commercial Foodservice Equipment Group The backlog of orders for the Commercial Foodservice Equipment Group was $754.8 million at December 31, 2022, most all of which is expected to be filled during 2023. The Commercial Foodservice Equipment Group's backlog was $881.9 million at January 1, 2022. The acquired Kloppenberg, Icetro and Marco businesses accounted for $8.8 million of the backlog.
This sales force is complimented with involvement of executive management to maintain relationships with customer executives and facilitate coordination amongst the brands for the key global accounts. Internationally, the company maintains sales and distribution offices along with global sales managers supported by a network of independent sales representatives.
This sales force is complimented with involvement of executive management to maintain relationships with customer executives and facilitate coordination amongst the brands for the key global accounts.
The Food Processing Equipment Group's backlog was $131.2 million at January 2, 2021. Residential Kitchen Equipment Group The backlog of orders for the Residential Kitchen Equipment Group was $443.4 million at January 1, 2022, all of which is expected to be filled during 2022.
The acquired Proxaut, CP Packaging, Colussi, and Escher businesses accounted for $42.2 million of the backlog. Residential Kitchen Equipment Group The backlog of orders for the Residential Kitchen Equipment Group was $175.0 million at December 31, 2022, all of which is expected to be filled during 2023. The Residential Kitchen Equipment Group's backlog was $443.4 million at January 1, 2022.
The company’s leading portfolio of trade names of its Food Processing Equipment Group include Alkar, Armor Inox, Auto-Bake, Baker Thermal Solutions, Burford, Cozzini, CV-Tek, Danfotech, Drake, Glimek, Hinds-Bock, Maurer-Atmos, MP Equipment, Pacproinc, RapidPak, Scanico, Spooner Vicars, Stewart Systems, Sveba Dahlen, Thurne and Ve.Ma.C.
The company’s leading portfolio of trade names of its Food Processing Equipment Group include Alkar, Armor Inox, Auto-Bake, Baker Thermal Solutions, Burford, Colussi Ermes, Cozzini, CV-Tek, Danfotech, Drake, Escher, Glimek, Hinds-Bock, Key-Log, Maurer-Atmos, MP Equipment, Pacproinc, Proxaut, RapidPak, Scanico, Spooner Vicars, Stewart Systems, Sveba Dahlen, Thurne, Ve.Ma.C., and Visionpak. 8 The company’s leading portfolio of trade names of its Residential Kitchen Equipment Group include AGA, AGA Cookshop, Brava, Char-Griller, EVO, Kamado Joe, La Cornue, Leisure Sinks, Lynx, Marvel, Masterbuilt, Mercury, Novy, Rangemaster, Rayburn, Redfyre, Sedona, Ss Brewtech, Stanley, TurboChef, U-Line, Varimixer and Viking.
The backlog is not necessarily indicative of the level of business expected for the year and the growth in our backlog represents impacts from COVID-19 pandemic related market conditions and supply chain challenges. 4 Food Processing Equipment Group The backlog of orders for the Food Processing Equipment Group was $187.5 million at January 1, 2022, which is expected to be filled by the end of fiscal 2023.
The backlog is not necessarily indicative of the level of business expected for the year and the growth in backlog represents impacts from COVID-19 pandemic related market conditions and supply chain challenges.
The company holds a broad portfolio of patents and licenses covering technology and applications related to various products, equipment and systems.
The company holds a broad portfolio of patents and licenses covering technology and applications related to various products, equipment and systems. Management believes the expiration of any one of these patents would not have a material adverse effect on the overall operations or profitability of the company.
Certain equipment and accessories are manufactured by other suppliers for sale by the company. The company believes it enjoys good relationships with its suppliers.
Certain equipment and accessories are manufactured by other suppliers for sale by the company. The company believes it enjoys good relationships with its suppliers. The present sources of supply have been impacted by COVID-19 pandemic market conditions, however, are adequate for the company's present and anticipated future requirements.
The present sources of supply have been impacted by COVID-19 pandemic market conditions, however are adequate for the company's present and anticipated future requirements. 7 Research and Development The company believes its future success will depend in part on its ability to develop new products and to improve existing products.
Research and Development The company believes its future success will depend in part on its ability to develop new products and to improve existing products.
Residential Kitchen Equipment Group The company’s products are marketed through a network of distributors, dealers, designers, select online retailers and home builders to the residential customers. The company markets and sells its products to these channels through a company-employed sales force.
The sales strategy of the company is fostered with Protein and Bakery Innovation Centers in Chicago, Dallas and India, which are available for development with technical performance and product testing for customers. Residential Kitchen Equipment Group The company’s products are marketed through a network of distributors, dealers, designers, select online retailers and home builders to the residential customers.
Commercial Foodservice Equipment Group As of January 1, 2022, 6,078 persons were employed within the Commercial Foodservice Equipment Group. Of this amount, 2,430 were management, administrative, sales, engineering and supervisory personnel; 3,213 were hourly production non-union workers; and 435 were hourly production union members.
Of this amount, 2,700 were management, administrative, sales, engineering and supervisory personnel; 3,411 were hourly production non-union workers; and 445 were hourly production union members.
To supplement the sales and distribution network, the company has invested in Middleby branded residential showrooms in Chicago, New York City, Orange County, California and Dallas. Marketing support is provided to and coordinated with its network of dealers, designers, and home builders sales partners to allow for coordinated efforts to market jointly to the end-user customers.
Marketing support is provided to and coordinated with its network of dealers, designers, and home builders' sales partners to allow for coordinated efforts to market jointly to the end-user customers. The company in certain cases offers incentive based financial programs to invest in local marketing activities with these sales partners.
The company’s products are distributed through a combination of an independent network of distributors and its wholly owned distribution operations. The company's wholly owned distribution operations include two primary customer support centers and regional logistic warehouse operations, which stock products and service parts for the respective region.
The company's wholly owned distribution operations include two primary customer support centers and regional logistic warehouse operations, which stock products and service parts for the respective region. To supplement the sales and distribution network, the company has invested in Middleby branded residential showrooms in Chicago, New York City, Orange County, California and Dallas.
The company strives to create a culture that encourages and celebrates collaboration, creativity and confidence while maintaining an environment based on ethical values. The goal is to create a workplace that enables employees to develop their individual paths toward their career goals and encourages a long-term working relationship with the company.
The goal is to create a workplace that enables employees to develop their individual paths toward their career goals and encourages a long-term working relationship with the company. Commercial Foodservice Equipment Group As of December 31, 2022, 6,556 persons were employed within the Commercial Foodservice Equipment Group.
Unionized employees accounted for approximately 5% of the company’s workforce as of January 1, 2022. Management believes that the relationships between employees and management are good. The company believes its success is a direct result of the people employed around the world.
Management believes that the relationships between employees and management are good. The company believes its success is a direct result of the people employed around the world. The company strives to create a culture that encourages and celebrates collaboration, creativity and confidence while maintaining an environment based on ethical values.
The company’s sale process is highly consultative due to the highly technical nature of the equipment, especially in the case of the full processing line solutions. During a typical sales process, sales people make several visits to the customer’s facility to conceptually discuss the production requirements, footprint and configuration of the proposed equipment.
Internationally, the company maintains sales and distribution offices along with global sales managers supported by a network of independent sales representatives. 5 The company’s sale process is highly consultative due to the highly technical nature of the equipment, especially in the case of the full processing line solutions.
Management believes the expiration of any one of these patents would not have a material adverse effect on the overall operations or profitability of the company. 8 Human Capital As of January 1, 2022, 10,624 persons were employed by the company and its subsidiaries among the various groups as described below. 6,104 employees are located in the United States and the remaining employees are located outside of the United States.
Human Capital As of December 31, 2022, 11,268 persons were employed by the company and its subsidiaries among the various groups as described below. 6,272 employees are located in the United States and the remaining employees are located outside of the United States. Unionized employees accounted for approximately 5% of the company’s workforce as of December 31, 2022.
The company employs a technically proficient sales force, many of whom have previous technical experience with the company as well as education backgrounds in food science. The sales strategy of the company is fostered with Protein and Bakery Innovation Centers in Chicago, Dallas and India, that are available for development with technical performance and product testing for customers.
During a typical sales process, salespeople make several visits to the customer’s facility to conceptually discuss the production requirements, footprint and configuration of the proposed equipment. The company employs a technically proficient sales force, many of whom have previous technical experience with the company as well as education backgrounds in food science.
In response to the COVID-19 pandemic, the company implemented procedures at its manufacturing locations and offices, including enhanced workplace sanitation, travel minimization, social distancing, staggered shifts and established work-at-home protocols for non-production employees. Diversity Fostering a culture that supports diversity among employees as well as professional growth and advancement is an integral part of the company’s identity.
The company invests in safety training, shares best practices, and reviews claim activity to continually review our progress in minimizing employee injury incidents in the workplace. Diversity Fostering a culture that supports diversity among employees as well as professional growth and advancement is an integral part of the company’s identity.
Removed
The acquired Novy, Char-Griller, and Kamado Joe and Masterbuilt businesses accounted for $152.4 million of the backlog. The Residential Kitchen Equipment Group's backlog was $153.3 million at January 2, 2021.
Added
("Icetro"), a manufacturer of ice, soft serve and slush machines, located in South Korea. 2 • December 2022: The company completed its acquisition of all the capital stock of Marco Beverage Systems ("Marco"), a leading designer and manufacturer of innovative and energy-efficient beverage dispense solutions, located in Ireland.
Removed
The company’s leading portfolio of trade names of its Residential Kitchen Equipment Group include AGA, AGA Cookshop, Brava, Char-Griller, EVO, Kamado Joe, La Cornue, Leisure Sinks, Lynx, Marvel, Masterbuilt, Mercury, Novy, Rangemaster, Rayburn, Redfyre, Sedona, Stanley, TurboChef, U-Line, Varimixer and Viking.
Added
Food Processing Equipment Group • June 2022: The company completed its acquisition of all of the capital stock of Proxaut S.r.l.
Added
("Proxaut"), a leader in auto guided vehicles for the food and industrial processing companies, located in Italy. • July 2022: The company completed its acquisition of all of the capital stock of CP Packaging, LLC ("CP Packaging"), a leading manufacturer of advanced high-speed vacuum packaging equipment, located in Appleton, Wisconsin. • July 2022: The company completed its acquisition of all of the capital stock of Colussi Ermes S.r.l.
Added
("Colussi"), a leading manufacturer of automated washing solutions, located in Italy. • November 2022: The company completed its acquisition of all of the capital stock of Escher Mixers S.r.l ("Escher"), a leading manufacturer of highly engineered spiral and planetary mixers for the industrial baking industry, located in Italy.
Added
The company is developing innovations to solve the challenges within our customers' operations. We believe automated equipment that addresses labor issues will provide our customers a meaningful return on their investment. Innovative equipment solutions, including integrated IoT platforms and universal controllers, will allow restaurateurs to scale their operations quickly and leverage data to make operational decisions.
Added
Food Processing Equipment Group The backlog of orders for the Food Processing Equipment Group was $313.2 million at December 31, 2022, which is expected to be filled by the end of fiscal 2024. The Food Processing Equipment Group's backlog was $187.5 million at January 1, 2022.
Added
The company markets and sells its products to these channels through a company-employed sales force. The company’s products are distributed through a combination of an independent network of distributors and its wholly owned distribution operations.
Added
In the international markets, the company competes with U.S. manufacturers and numerous global and local competitors.
Added
The company encourages a culture of safety due to the fact it reduces the risk of injury to employees, decreases expenses, and increases production. Each of our manufacturing locations maintains active safety committees that frequently review and assess the safety condition of their local work environment.
Added
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.
Added
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.
Added
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.
Added
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.
Added
The company has implemented a cyber incident response plan that provides controls and procedures for timely and accurate reporting of any material cybersecurity incident. 10

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

47 edited+7 added−11 removed100 unchanged
Biggest changeWith a range of outcomes still possible, the impact from Brexit remains uncertain and will depend, in part, on the final outcome of tariff, trade, regulatory and other negotiations. The company is subject to currency fluctuations and other risks from its operations outside the United States. The company has manufacturing and distribution operations located in Asia, Europe and Latin America.
Biggest changeThe company is subject to currency fluctuations and other risks from its operations outside the United States. The company has manufacturing and distribution operations located in Asia, Europe and Latin America. The company’s operations are subject to the impact of economic downturns, political instability and foreign trade restrictions, which may adversely affect the company’s business, financial condition and operating results.
As a result, operating margins may also be negatively impacted by worldwide currency fluctuations that result in higher costs for certain cross-border transactions. 11 Business and Operational Risks The COVID-19 pandemic has adversely impacted, and likely will continue to, adversely impact and pose risks to the company, the nature and extent of which are highly uncertain and unpredictable.
As a result, operating margins may also be negatively impacted by worldwide currency fluctuations that result in higher costs for certain cross-border transactions. Business and Operational Risks The COVID-19 pandemic has adversely impacted, and likely will continue to, adversely impact and pose risks to the company, the nature and extent of which are highly uncertain and unpredictable.
Any such violations of law or improper actions could subject the company to civil or criminal investigations in the United States and in other jurisdictions, lead to substantial civil or criminal, monetary and non-monetary penalties, and related shareholder lawsuits, lead to increased costs of compliance and damage the company’s reputation. The company is subject to potential liability under environmental laws.
Any such violations of law or improper actions could subject the company to civil or criminal investigations in the United States and in other jurisdictions, lead to substantial civil or criminal, monetary and non-monetary penalties, and related shareholder lawsuits, lead to increased costs of compliance and damage the company’s reputation. 20 The company is subject to potential liability under environmental laws.
Each of these factors could result in a material and adverse change in the company’s business, financial condition and results of operations. The company may be unable to manage its growth. The company has recently experienced rapid growth in its business. Continued growth could place a strain on the company’s management, operations and financial resources.
Each of these factors could result in a material and adverse change in the company’s business, financial condition and results of operations. 16 The company may be unable to manage its growth. The company has recently experienced rapid growth in its business. Continued growth could place a strain on the company’s management, operations and financial resources.
In addition, the company is and will be required to comply with the laws and regulations of foreign governmental and regulatory authorities of each country in which the company conducts business. 18 There can be no assurance that the company will be able to succeed in marketing its products and services in international markets.
In addition, the company is and will be required to comply with the laws and regulations of foreign governmental and regulatory authorities of each country in which the company conducts business. There can be no assurance that the company will be able to succeed in marketing its products and services in international markets.
For additional detail related to this risk, see Part II, Item 7A, "Quantitative and Qualitative Disclosure About Market Risk." The company has a significant amount of goodwill and indefinite life intangibles could suffer losses due to asset impairment charges.
For additional detail related to this risk, see Part II, Item 7A, "Quantitative and Qualitative Disclosure About Market Risk." 13 The company has a significant amount of goodwill and indefinite life intangibles could suffer losses due to asset impairment charges.
If convicted or found liable, the company could be subject to significant fines, penalties, repayments or other damages. 20 The company’s reputation, ability to do business, and results of operations may be impaired by the improper conduct of any of its employees, agents, or business partners.
If convicted or found liable, the company could be subject to significant fines, penalties, repayments or other damages. The company’s reputation, ability to do business, and results of operations may be impaired by the improper conduct of any of its employees, agents, or business partners.
If these audits result in assessments different from amounts recorded, future financial results may include unfavorable tax adjustments. 21 The trading price of the company's common stock has been volatile, and investors in the company's common stock may experience substantial losses. The trading price of the company's common stock has been volatile and may become volatile again in the future.
If these audits result in assessments different from amounts recorded, future financial results may include unfavorable tax adjustments. The trading price of the company's common stock has been volatile, and investors in the company's common stock may experience substantial losses. The trading price of the company's common stock has been volatile and may become volatile again in the future.
The company estimates and records its future warranty costs based upon past experience. These warranty expenses may increase in the future and may exceed the company’s warranty reserves, which, in turn, could adversely affect the company’s financial performance. 16 The company’s financial performance is subject to significant fluctuations.
The company estimates and records its future warranty costs based upon past experience. These warranty expenses may increase in the future and may exceed the company’s warranty reserves, which, in turn, could adversely affect the company’s financial performance. The company’s financial performance is subject to significant fluctuations.
Higher energy costs, rising interest rates, weakness in the residential construction, housing and home improvement markets, financial market volatility, inflation, recession and acts of terrorism may also adversely affect the company’s business and financial performance. Additionally, the company may experience difficulties in scaling its operations due to economic pressures in the U.S. and international markets.
Higher energy costs, rising interest rates, weakness in the residential construction, housing and home improvement markets, financial market volatility, inflation, recession, global hostilities and acts of terrorism may also adversely affect the company’s business and financial performance. Additionally, the company may experience difficulties in scaling its operations due to economic pressures in the U.S. and international markets.
The company is monitoring the global outbreak of the COVID-19 pandemic and taking steps to mitigate the risks posed by its spread, including working with its customers, employees, suppliers and other stakeholders. The pandemic has adversely affected, and is expected to continue to adversely affect, the company's financial results, condition and outlook.
The company is monitoring the global outbreak of the COVID-19 pandemic and taking steps to mitigate the risks posed by its spread, including working with its customers, employees, suppliers and other stakeholders. The pandemic has adversely affected, the company's financial results, condition and outlook.
The company operates in highly competitive industries. In each of the company’s three business segments, competition is based on a variety of factors including product features and design, brand recognition, reliability, durability, technology, energy efficiency, breadth of product offerings, price, customer relationships, delivery lead-times, serviceability and after-sale service. The company has numerous competitors in each business segment.
In each of the company’s three business segments, competition is based on a variety of factors including product features and design, brand recognition, reliability, durability, technology, energy efficiency, breadth of product offerings, price, customer relationships, delivery lead-times, serviceability and after-sale service. The company has numerous competitors in each business segment.
The company depends significantly on the company’s executive officers and certain other key personnel, whom could be difficult to replace. While the company has employment agreements with certain key executives, the company cannot be certain that it will succeed in retaining this personnel or their services under existing agreements.
The company depends significantly on its key personnel. The company depends significantly on the company’s executive officers and certain other key personnel, who could be difficult to replace. While the company has employment agreements with certain key executives, the company cannot be certain that it will succeed in retaining key personnel or their services under existing agreements.
The company may also experience difficulty in managing its international operations because of, among other things, competitive conditions overseas, management of foreign exchange risk, established domestic markets, and language and cultural differences.
The company may also experience difficulty in managing its international operations because of, among other things, competitive conditions overseas, geopolitical threats or hostilities, management of foreign exchange risk, established domestic markets, and language and cultural differences.
The company’s balance sheet includes a significant amount of goodwill and indefinite life intangible assets, which represent approximately 35% and 21%, respectively, of its total assets as of January 1, 2022. The excess of the purchase price over the fair value of assets acquired, including identifiable intangible assets, and liabilities assumed in conjunction with acquisitions is recorded as goodwill.
The company’s balance sheet includes a significant amount of goodwill and indefinite life intangible assets, which represent approximately 35% and 20%, respectively, of its total assets as of December 31, 2022. The excess of the purchase price over the fair value of assets acquired, including identifiable intangible assets, and liabilities assumed in conjunction with acquisitions is recorded as goodwill.
The incapacity, inability or unwillingness of certain of these people to perform their services may have a material adverse effect on the company.
The incapacity, inability or unwillingness of certain personnel to perform their services may have a material adverse effect on the company.
The company’s level of indebtedness could have adverse consequences to its business and operations, including the following: • the company may be unable to obtain additional financing for working capital, capital expenditures, product development, acquisitions and other general corporate purposes; • a significant portion of the company’s cash flow from operations must be dedicated to debt service, which reduces the amount of cash the company has available for other purposes; • the company may be more vulnerable in the event of a downturn in the company’s business or general economic and industry conditions and have limited flexibility in planning for, or reacting to, changes in its business and/or industry; • the company may be disadvantaged compared to its competitors that are less leveraged and thereby have greater financial flexibility; and • the company may be restricted in its ability to make strategic acquisitions and to pursue new business opportunities. 12 The company’s current credit agreement limits its ability to conduct business, which could negatively affect the company’s ability to finance future capital needs and engage in other business activities.
The company’s level of indebtedness could have adverse consequences to its business and operations, including the following: • the company may be unable to obtain additional financing for working capital, capital expenditures, product development, acquisitions and other general corporate purposes; • a significant portion of the company’s cash flow from operations must be dedicated to debt service, which reduces the amount of cash the company has available for other purposes; • the company may be more vulnerable in the event of a downturn in the company’s business or general economic and industry conditions and have limited flexibility in planning for, or reacting to, changes in its business and/or industry; • the company may be disadvantaged compared to its competitors that are less leveraged and thereby have greater financial flexibility; and • the company may be restricted in its ability to make strategic acquisitions and to pursue new business opportunities.
The inability to successfully complete the development of a product, or a determination by the company, for financial, technical or other reasons, not to complete development of a product, particularly in instances in which the company has made significant expenditures, could have a material adverse effect on the company’s financial condition and operating results. 15 The company depends on key customers for a material portion of its revenues.
The inability to successfully complete the development of a product, or a determination by the company, for financial, technical or other reasons, not to complete development of a product, particularly in instances in which the company has made significant expenditures, could have a material adverse effect on the company’s financial condition and operating results.
While the company continues to evaluate potential acquisitions, it may not be able to identify and successfully negotiate suitable acquisitions, obtain financing for future acquisitions on satisfactory terms, obtain regulatory approval for certain acquisitions, or otherwise complete acquisitions in the future. An inability to identify or complete future acquisitions could limit the company’s growth.
While the company continues to evaluate potential acquisitions, it may not be able to identify and successfully negotiate suitable acquisitions, obtain financing for future acquisitions on satisfactory terms, obtain regulatory approval for certain acquisitions, or otherwise complete acquisitions in the future.
Acquisitions and investments entail numerous risks, including, among others: • difficulties in the assimilation of acquired businesses or technologies and the inability to fully realize some of the expected synergies or otherwise achieve anticipated revenues and profits; • inability to operate acquired businesses or utilize acquired technologies profitably; • the significant amount of management time and attention needed to identify, execute and integrate any acquired businesses; • potential assumption of unknown material liabilities; • failure to achieve financial or operating objectives; • unanticipated costs relating to acquisitions or to the integration of acquired businesses; • loss of customers, suppliers, or key employees; and • the impact on the company's internal controls and compliance with the regulatory requirements under the Sarbanes-Oxley Act of 2002. 17 The company may not be able to successfully integrate any operations, personnel, services or products that it has acquired or may acquire in the future.
Acquisitions and investments entail numerous risks, including, among others: • difficulties in the assimilation of acquired businesses or technologies and the inability to fully realize some of the expected synergies or otherwise achieve anticipated revenues and profits; • inability to operate acquired businesses or utilize acquired technologies profitably; • the significant amount of management time and attention needed to identify, execute and integrate any acquired businesses; • potential assumption of unknown material liabilities; • failure to achieve financial or operating objectives; • unanticipated costs relating to acquisitions or to the integration of acquired businesses; • loss of customers, suppliers, or key employees; and • the impact on the company's internal controls and compliance with the regulatory requirements under the Sarbanes-Oxley Act of 2002.
Fluctuations in interest rates could adversely affect the company's results of operations and financial position. The company's profitability may be adversely affected during any periods of unexpected or rapid increases in interest rates. The company maintains a revolving credit facility, which, at January 1, 2022, bore interest at 1.375% above LIBOR per annum.
Fluctuations in interest rates could adversely affect the company's results of operations and financial position. The company's profitability has been and may continue to be adversely affected during any periods of unexpected or rapid increases in interest rates. The company maintains a revolving credit facility, which, at December 31, 2022, bore interest at 1.625% above LIBOR per annum.
As a result, changes in the purchasing patterns or loss of one or more key customers could adversely impact the company’s operating results. Many of the company’s key customers are large restaurant chains and major food processing companies.
The company depends on key customers for a material portion of its revenues. As a result, changes in the purchasing patterns or loss of one or more key customers could adversely impact the company’s operating results. Many of the company’s key customers are large restaurant chains and major food processing companies.
Item 1B. Unresolved Staff Comments Not applicable. 22
Item 1B. Unresolved Staff Comments Not applicable. 21
Any such activity could cause a decrease in the market price of the company's common stock. 13 In addition, the capped call counterparties are financial institutions, and the company is subject to the risk that one or more of the capped call counterparties may default or otherwise fail to perform, or may exercise certain rights to terminate, their obligations under the capped call transactions.
In addition, the capped call counterparties are financial institutions, and the company is subject to the risk that one or more of the capped call counterparties may default or otherwise fail to perform, or may exercise certain rights to terminate, their obligations under the capped call transactions.
The company is subject to risks associated with developing products and technologies, which could delay product introductions and result in significant expenditures. The product, program and service needs of the company’s customers change and evolve regularly, and the company invests substantial amounts in research and development efforts to pursue advancements in a wide range of technologies, products and services.
The product, program and service needs of the company’s customers change and evolve regularly, and the company invests substantial amounts in research and development efforts to pursue advancements in a wide range of technologies, products and services.
If the company is unable to obtain such licenses, it also may not be able to redesign the company’s products or services to avoid infringement, which could materially adversely affect the company’s business, financial condition and operating results.
If the company is unable to obtain such licenses, it also may not be able to redesign the company’s products or services to avoid infringement, which could materially adversely affect the company’s business, financial condition and operating results. 19 The company may be subject to information technology system failures, network disruptions, cybersecurity attacks and breaches in data security, which may materially adversely affect the company’s operations, financial condition and operating results.
An interruption in or the cessation of an important supply by any third party and the company’s inability to make alternative arrangements in a timely manner, or at all, could have a material adverse effect on the company’s business, financial condition and operating results.
An interruption in or the cessation of an important supply by any third party and the company’s inability to make alternative arrangements in a timely manner, or at all, could have a material adverse effect on the company’s business, financial condition and operating results. 15 The company faces risks related to health epidemics and other widespread outbreaks of contagious disease, which could significantly disrupt its operations and impact its operating results.
Expansion of the company’s international operations involves special challenges that it may not be able to meet. The company’s failure to meet these challenges could adversely affect its business, financial condition and operating results. The company plans to continue to expand its international operations. The company faces certain risks inherent in doing business in international markets.
An inability to identify or complete future acquisitions could limit the company’s growth. 17 Expansion of the company’s international operations involves special challenges that it may not be able to meet. The company’s failure to meet these challenges could adversely affect its business, financial condition and operating results. The company plans to continue to expand its international operations.
There can be no assurance that the company is or will be aware of all patents containing claims that may pose a risk of infringement by its products and services.
The company’s competitors, as well as other companies and individuals, may obtain patents related to the types of products and services the company offers or plans to offer. There can be no assurance that the company is or will be aware of all patents containing claims that may pose a risk of infringement by its products and services.
Therefore, the pandemic could lead to an extended disruption of economic activity and the impact on the company's consolidated results of operations, financial position and cash flows could be material. In addition, the continuation or a resurgence of the pandemic could exacerbate the other risk factors.
The lingering effects of the pandemic could lead to an extended disruption of economic activity and the impact on the company's consolidated results of operations, financial position and cash flows could be material.
Consequently, any announcement of any such transaction could have a material adverse effect upon the market price of the company’s common stock. Moreover, depending upon the nature of any transaction, the company may experience a charge to earnings, which could be material and have an adverse impact upon the market price of the company’s common stock.
Moreover, depending upon the nature of any transaction, the company may experience a charge to earnings, which could be material and have an adverse impact upon the market price of the company’s common stock. 18 The company’s business could suffer in the event of a work stoppage by its unionized labor force.
Any future strikes, employee slowdowns or similar actions by one or more unions, in connection with labor contract negotiations or otherwise, could have a material adverse effect on the company’s ability to operate the company’s business. The company depends significantly on its key personnel.
Approximately 2% of the company's workforce is covered by collective bargaining agreements that expire within one year. Any future strikes, employee slowdowns or similar actions by one or more unions, in connection with labor contract negotiations or otherwise, could have a material adverse effect on the company’s ability to operate the company’s business.
In addition, it may be necessary for the company to recall products that do not meet approved specifications, which could result in adverse publicity as well as costs connected to the recall and loss of revenue.
Plaintiffs in some jurisdictions have received substantial damage awards against companies based upon claims for injuries allegedly caused by the use of their products. In addition, it may be necessary for the company to recall products that do not meet approved specifications, which could result in adverse publicity as well as costs connected to the recall and loss of revenue.
In addition, upward pressure on the cost of providing healthcare coverage to current employees and retirees may increase the company's future funding obligations and adversely affect its results of operations and cash flows. 14 The company faces intense competition in the commercial foodservice, food processing, and residential kitchen equipment industries and failure to successfully compete could impact the company’s results of operations and cash flows.
In addition, upward pressure on the cost of providing healthcare coverage to current employees and retirees may increase the company's future funding obligations and adversely affect its results of operations and cash flows.
The company’s business could suffer in the event of a work stoppage by its unionized labor force. Because the company has a significant number of workers whose employment is subject to collective bargaining agreements and labor union representation, the company is vulnerable to possible organized work stoppages and similar actions.
Because the company has a significant number of workers whose employment is subject to collective bargaining agreements and labor union representation, the company is vulnerable to possible organized work stoppages and similar actions. Unionized employees accounted for approximately 5% of the company’s workforce as of December 31, 2022.
Any such litigation, whether successful or unsuccessful, could result in substantial costs to the company and diversions of the company’s resources, either of which could adversely affect the company’s business. 19 Any infringement by the company of a third party's patent rights could result in litigation and adversely affect its ability to provide, or could increase the cost of providing, the company’s products and services.
Any such litigation, whether successful or unsuccessful, could result in substantial costs to the company and diversions of the company’s resources, either of which could adversely affect the company’s business.
Unionized employees accounted for approximately 5% of the company’s workforce as of January 1, 2022. The company has union contracts with employees at its facilities in Windsor, California; Algona, Iowa; Elgin, Illinois; Easton, Pennsylvania and Lodi, Wisconsin that extend through December 2023, December 2022, July 2022, May 2023 and December 2024, respectively.
The company has union contracts with employees at its facilities in Windsor, California; Algona, Iowa; Elgin, Illinois; Easton, Pennsylvania and Lodi, Wisconsin that extend through December 2023, December 2026, July 2025, May 2023 and December 2024, respectively. The company also has a union workforce at its manufacturing facility in the Philippines under a contract that extends through June 2026.
The company may seek to expand or enhance some of its operations by forming joint ventures or alliances with various strategic partners throughout the world.
The company may not be able to successfully integrate any operations, personnel, services or products that it has acquired or may acquire in the future. The company may seek to expand or enhance some of its operations by forming joint ventures or alliances with various strategic partners throughout the world.
Due to the global breadth of the pandemic's spread and the range of governmental and community reactions, there is uncertainty around the pandemic's ultimate impact and the timing of recovery, including as a result of the emergence of new COVID-19 variants, uncertainty regarding vaccine effectiveness on certain variants and vaccine availability.
Due to the global breadth of the pandemic's spread and the range of governmental and community reactions, there is uncertainty around the pandemic's ultimate impact and the timing of recovery.
These restrictive covenants, among others, could negatively affect the company’s ability to finance its future capital needs, engage in other business activities or withstand a future downturn in the company’s business or the economy.
These restrictive covenants, among others, could negatively affect the company’s ability to finance its future capital needs, engage in other business activities or withstand a future downturn in the company’s business or the economy. 12 Under the company’s current credit agreement, the company is required to maintain certain specified financial ratios and meet financial tests, including certain ratios of secured leverage and interest coverage.
The company may be the subject of product liability claims or product recalls, and it may be unable to obtain or maintain insurance adequate to cover potential liabilities. Product liability is a significant commercial risk to the company. The company’s business exposes it to potential liability risks that arise from the manufacturing, marketing and selling of the company’s products.
Any disruption of our suppliers' or customers' businesses would likely impact our sales and operating results. The company may be the subject of product liability claims or product recalls, and it may be unable to obtain or maintain insurance adequate to cover potential liabilities. Product liability is a significant commercial risk to the company.
The company’s level of indebtedness could adversely affect its business, results of operations and growth strategy. The company now has and may continue to have a significant amount of indebtedness. At January 1, 2022, the company had $2.4 billion of borrowings and $2.7 million in letters of credit outstanding.
In addition, the continuation or a resurgence of the pandemic could exacerbate the other risk factors. 11 The company’s level of indebtedness could adversely affect its business, results of operations and growth strategy. The company now has and may continue to have a significant amount of indebtedness.
Moreover, competitors may develop technologies or products that render the company’s products obsolete or less marketable. If the company is unable to successfully compete in this highly competitive environment, the company’s business, financial condition and operating results will be materially harmed.
If the company is unable to successfully compete in this highly competitive environment, the company’s business, financial condition and operating results will be materially harmed. 14 The company is subject to risks associated with developing products and technologies, which could delay product introductions and result in significant expenditures.
These effects have included and could continue to include disruptions or restrictions on our ability to travel, as well as temporary closures of our facilities or the facilities of our suppliers or customers. Any disruption of our suppliers or customers would likely impact our sales and operating results.
The spread of COVID-19 and other contagious diseases, or other adverse public health developments, has had a material and adverse effect on our business operations. These effects have included and could continue to include disruptions or restrictions on our ability to travel, as well as temporary closures of our facilities or the facilities of our suppliers or customers.
The company’s operations are subject to the impact of economic downturns, political instability and foreign trade restrictions, which may adversely affect the company’s business, financial condition and operating results. The company anticipates that international sales will continue to account for a significant portion of consolidated net sales in the foreseeable future.
The company anticipates that international sales will continue to account for a significant portion of consolidated net sales in the foreseeable future.
In addition to direct expenditures for damages, settlement and defense costs, there is a possibility of adverse publicity as a result of product liability claims. Plaintiffs in some jurisdictions have received substantial damage awards against companies based upon claims for injuries allegedly caused by the use of their products.
The company’s business exposes it to potential liability risks that arise from the manufacturing, marketing and selling of the company’s products. In addition to direct expenditures for damages, settlement and defense costs, there is a possibility of adverse publicity as a result of product liability claims.
Patents of third parties may have an important bearing on the company’s ability to offer some of its products and services. The company’s competitors, as well as other companies and individuals, may obtain patents related to the types of products and services the company offers or plans to offer.
Any infringement by the company of a third party's patent rights could result in litigation and adversely affect its ability to provide, or could increase the cost of providing, the company’s products and services. Patents of third parties may have an important bearing on the company’s ability to offer some of its products and services.
Removed
Uncertainty surrounding the terms of the United Kingdom’s withdrawal from the European Union may have a negative effect on global economic conditions, financial markets or the Company’s business. In June 2016, a majority of voters in the United Kingdom elected to withdraw from the European Union in a national referendum.
Added
At December 31, 2022, the company had $2.7 billion of borrowings and $1.9 million in letters of credit outstanding.
Removed
On January 31, 2020, the U.K. officially exited the European Union and entered into a transition period to negotiate the final terms of Brexit. The transition period ended on December 31, 2020.
Added
The company’s current credit agreement limits its ability to conduct business, which could negatively affect the company’s ability to finance future capital needs and engage in other business activities.
Removed
Although the U.K. and the European Union have entered into a trade and cooperation agreement (the “TCA”), which came into full force on May 1, 2021, significant parts of the U.K. economy are not addressed in detail by the TCA and a number of issues have been the subject of further bilateral negotiations since the beginning of 2021.
Added
Any such activity could cause a decrease in the market price of the company's common stock.
Removed
The potential future impact of Brexit remains unclear and could adversely impact certain areas of labor and trade in addition to creating further short-term uncertainty and currency volatility.
Added
The company faces intense competition in the commercial foodservice, food processing, and residential kitchen equipment industries and failure to successfully compete could impact the company’s results of operations and cash flows. The company operates in highly competitive industries.
Removed
Changes to the trading relationship between the U.K. and the European Union could result in increased cost of goods imported into and exported from the U.K. and may decrease the profitability of the company's U.K. and other operations.
Added
Moreover, competitors may develop technologies or products that render the company’s products obsolete or less marketable.
Removed
Additional currency volatility could drive a weaker British pound, which increases the cost of goods imported into the U.K. and may decrease the profitability of the company's U.K. operations.
Added
The company faces certain risks inherent in doing business in international markets.
Removed
Currency exchange rates for the British pound and the euro with respect to each other and to the U.S. dollar may be negatively affected by Brexit, which could cause volatility in our financial results.
Added
Consequently, any announcement of any such transaction could have a material adverse effect upon the market price of the company’s common stock.
Removed
Under the company’s current credit agreement, the company is required to maintain certain specified financial ratios and meet financial tests, including certain ratios of secured leverage and interest coverage.
Removed
The company faces risks related to health epidemics and other widespread outbreaks of contagious disease, which could significantly disrupt its operations and impact its operating results. The spread of COVID-19 and other contagious diseases, or other adverse public health developments, has had, and will likely continue to have, a material and adverse effect on our business operations.
Removed
The company also has a union workforce at its manufacturing facility in the Philippines under a contract that extends through June 2026. Approximately 1% of the company's workforce is covered by collective bargaining agreements that expire within one year.
Removed
The company may be subject to information technology system failures, network disruptions, cybersecurity attacks and breaches in data security, which may materially adversely affect the company’s operations, financial condition and operating results.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe principal properties of the company used to conduct business operations are listed below: Location Principal Function Square Footage Owned/ Leased Lease Expiration Commercial Foodservice: Fort Smith, AR Manufacturing, Warehousing and Offices 712,600 Leased Jan-26 Brea, CA Manufacturing, Warehousing and Offices 86,600 Leased Sep-26 Vacaville, CA Manufacturing, Warehousing and Offices 81,200 Leased May-27 Windsor, CA Manufacturing, Warehousing and Offices 75,000 Leased Apr-32 Corona, CA Manufacturing and Offices 86,000 Owned N/A Louisville, CO Manufacturing, Warehousing and Offices 37,700 Leased Jul-28 Venice, FL Manufacturing, Warehousing and Offices 38,600 Leased Jun-24 Elgin, IL Manufacturing, Warehousing and Offices 207,000 Owned N/A Mundelein, IL Manufacturing, Warehousing and Offices 70,000 Owned N/A Rockton, IL Manufacturing, Warehousing and Offices 339,400 Owned N/A South Beloit, IL Warehousing 171,700 Leased Mar-24 Menominee, MI Manufacturing, Warehousing and Offices 60,000 Owned N/A Charlotte, NC Manufacturing, Warehousing and Offices 44,000 Leased Feb-24 Fuquay-Varina, NC Manufacturing, Warehousing and Offices 183,900 Owned N/A Bow, NH Manufacturing, Warehousing and Offices 100,000 Owned N/A Pembroke, NH Warehousing 136,200 Leased Jul-24 Dayton, OH Manufacturing, Warehousing and Offices 37,700 Owned N/A Moraine, OH Warehousing 38,300 Leased Jun-27 Tualatin, OR Manufacturing, Warehousing and Offices 29,500 Leased May-28 Easton, PA Manufacturing, Warehousing and Offices 246,700 Owned N/A Smithville, TN Manufacturing, Warehousing and Offices 268,000 Owned N/A Allen, TX Warehousing 21,000 Leased Jun-23 Carrollton, TX Manufacturing, Warehousing and Offices 132,400 Leased Aug-22 Essex Junction, VT Manufacturing, Warehousing and Offices* 282,500 Owned N/A Renton, WA Manufacturing, Warehousing and Offices 61,700 Leased Sep-28 New South Wales, Australia Manufacturing, Warehousing and Offices 204,900 Owned N/A Toronto, Canada Manufacturing, Warehousing and Offices* 87,700 Owned N/A Humen, China Manufacturing, Warehousing 6,600 Leased Mar-22 Qingdao City, China Manufacturing, Warehousing and Offices 113,500 Leased Jul-29 Zhuhai City, China Manufacturing, Warehousing and Offices 104,500 Leased May-22 Brøndby, Denmark Manufacturing, Warehousing and Offices 50,900 Owned N/A Randers, Denmark Manufacturing, Warehousing and Offices 50,100 Owned N/A Viljandi, Estonia Manufacturing and Offices 47,000 Owned N/A Nusco, Italy Manufacturing, Warehousing and Offices 260,600 Owned N/A Sedico, Italy Manufacturing, Warehousing and Offices 52,500 Leased Feb-24 Nogales, Mexico Manufacturing, Warehousing and Offices 129,000 Owned N/A Wiślina, Poland Manufacturing, Warehousing and Offices 77,500 Owned N/A Pineda de Mar, Spain Manufacturing, Warehousing and Offices 57,100 Owned N/A Fristad, Sweden Manufacturing, Warehousing and Offices 173,800 Owned N/A Laguna, the Philippines Manufacturing, Warehousing and Offices 115,200 Owned N/A Lincoln, the United Kingdom Manufacturing, Warehousing and Offices 100,000 Owned N/A 23 Location Principal Function Square Footage Owned/ Leased Lease Expiration Food Processing: Gainesville, GA Manufacturing, Warehousing and Offices 107,400 Owned N/A Algona, IA Manufacturing, Warehousing and Offices 70,100 Owned N/A Elgin, IL Manufacturing, Warehousing and Offices 25,000 Owned N/A Elk Grove, IL Manufacturing, Warehousing and Offices 101,500 Leased Nov-29 Clayton, NC Manufacturing, Warehousing and Offices 65,000 Leased Oct-24 Maysville, OK Manufacturing, Warehousing and Offices 36,700 Owned N/A Souderton, PA Manufacturing, Warehousing and Offices 35,000 Owned N/A Plano, TX Manufacturing, Warehousing and Offices 339,100 Leased Apr-22 Waynesboro, VA Manufacturing, Warehousing and Offices 26,400 Owned N/A Bothell, WA Manufacturing, Warehousing and Offices 23,600 Leased May-25 Lodi, WI Manufacturing, Warehousing and Offices 114,600 Owned N/A Aalborg, Denmark Manufacturing, Warehousing and Offices 68,300 Leased Dec-22 Mauron, France Manufacturing, Warehousing and Offices 107,200 Leased Dec-22 Reichenau, Germany Manufacturing, Warehousing and Offices 57,900 Owned N/A Bangalore, India Manufacturing, Warehousing and Offices 75,000 Leased Mar-24 Castelnuovo Rangone, Italy Manufacturing, Warehousing and Offices 26,800 Leased Dec-23 Norwich, the United Kingdom Manufacturing, Warehousing and Offices 30,000 Owned N/A Residential Kitchen: Chino, CA Warehousing and Offices 100,000 Leased Feb-22 Redwood City, CA Warehousing and Offices 20,600 Leased Jul-24 Atlanta, GA Warehousing and Offices 169,200 Leased Dec-24 Buford, GA Warehousing and Offices 178,100 Leased Feb-23 Columbus, GA Warehousing and Offices 133,800 Leased Feb-23 Greenville, MI Manufacturing, Warehousing and Offices 225,000 Owned N/A Greenwood, MS Manufacturing, Warehousing and Offices** 740,600 Owned N/A Brown Deer, WI Manufacturing, Warehousing and Offices 161,900 Leased Nov-26 Kuurne, Belgium Manufacturing and Offices 289,700 Owned N/A Saint Ouen L'aumone , France Manufacturing, Warehousing 30,400 Owned N/A Waterford, Ireland Warehousing and Offices 73,000 Leased Jul-27 Ketley, the United Kingdom Manufacturing and Offices 217,300 Owned N/A Leamington Spa, the United Kingdom Manufacturing and Offices 270,200 Owned N/A Leamington Spa, the United Kingdom Manufacturing and Offices 100,300 Leased Aug-29 Nottingham, the United Kingdom Warehousing and Offices 153,100 Owned N/A * Contains two separate manufacturing facilities. ** Contains four separate manufacturing facilities.
Biggest changeThe principal properties of the company used to conduct business operations are listed below: Location Principal Function Square Footage Owned/ Leased Lease Expiration Commercial Foodservice: Fort Smith, AR Manufacturing, Warehousing and Offices 712,600 Leased Jan-26 Brea, CA Manufacturing, Warehousing and Offices 86,600 Leased Sep-26 Corona, CA Manufacturing and Offices 86,000 Owned N/A Vacaville, CA Manufacturing, Warehousing and Offices 128,800 Leased Nov-29 Windsor, CA Manufacturing, Warehousing and Offices 75,000 Leased Apr-32 Englewood, CO Manufacturing, Warehousing and Offices 105,000 Owned N/A Louisville, CO Manufacturing, Warehousing and Offices 37,700 Leased Jul-28 Venice, FL Manufacturing, Warehousing and Offices 23,300 Leased Jun-24 Elgin, IL Manufacturing, Warehousing and Offices 191,200 Owned N/A Mundelein, IL Manufacturing, Warehousing and Offices 70,000 Owned N/A Rockton, IL Manufacturing, Warehousing and Offices 339,400 Owned N/A South Beloit, IL Warehousing 171,700 Leased Mar-24 Menominee, MI Manufacturing, Warehousing and Offices 60,000 Owned N/A Charlotte, NC Manufacturing, Warehousing and Offices 44,000 Leased Feb-24 Fuquay-Varina, NC Manufacturing, Warehousing and Offices 183,900 Owned N/A Bow, NH Manufacturing, Warehousing and Offices 100,000 Owned N/A Pembroke, NH Warehousing 136,200 Leased Jul-24 Dayton, OH Manufacturing, Warehousing and Offices 37,700 Owned N/A Moraine, OH Warehousing 38,300 Leased Jun-27 Tualatin, OR Manufacturing, Warehousing and Offices 29,500 Leased May-28 Easton, PA Manufacturing, Warehousing and Offices 246,700 Owned N/A Smithville, TN Manufacturing, Warehousing and Offices 268,000 Owned N/A Carrollton, TX Manufacturing, Warehousing and Offices 132,400 Leased Aug-32 Essex Junction, VT* Manufacturing, Warehousing and Offices 372,500 Owned N/A Renton, WA Manufacturing, Warehousing and Offices 72,400 Leased Sep-28 New South Wales, Australia Manufacturing, Warehousing and Offices 204,900 Owned N/A Toronto, Canada* Manufacturing, Warehousing and Offices 87,700 Owned N/A Humen, China Manufacturing, Warehousing 6,600 Leased Mar-23 Ningbo, China Manufacturing, Warehousing and Offices 64,300 Leased Oct-25 Qingdao City, China Manufacturing, Warehousing and Offices 113,500 Leased Jul-29 Zhuhai City, China Manufacturing, Warehousing and Offices 104,500 Leased Dec-22 Brøndby, Denmark Manufacturing, Warehousing and Offices 50,900 Owned N/A Randers, Denmark Manufacturing, Warehousing and Offices 50,100 Owned N/A Viljandi, Estonia Manufacturing and Offices 47,000 Owned N/A Dublin, Ireland Manufacturing, Warehousing and Offices 17,100 Leased Sep-24 Nusco, Italy Manufacturing, Warehousing and Offices 260,600 Owned N/A Sedico, Italy Manufacturing, Warehousing and Offices 52,500 Leased Jan-23 Nogales, Mexico Manufacturing, Warehousing and Offices 129,000 Owned N/A Wiślina, Poland Manufacturing, Warehousing and Offices 77,500 Owned N/A Incheon, South Korea Manufacturing, Warehousing and Offices 227,400 Owned N/A Pineda de Mar, Spain Manufacturing, Warehousing and Offices 50,100 Owned N/A Fristad, Sweden Manufacturing, Warehousing and Offices 173,800 Owned N/A Laguna, the Philippines Manufacturing, Warehousing and Offices 115,200 Owned N/A Lincoln, the United Kingdom Manufacturing, Warehousing and Offices 100,000 Owned N/A 22 Location Principal Function Square Footage Owned/ Leased Lease Expiration Food Processing: Gainesville, GA Manufacturing, Warehousing and Offices 107,400 Owned N/A Algona, IA Manufacturing, Warehousing and Offices 70,100 Owned N/A Elgin, IL Manufacturing, Warehousing and Offices 75,000 Owned N/A Elk Grove, IL Manufacturing, Warehousing and Offices 101,500 Leased Nov-29 Clayton, NC Manufacturing, Warehousing and Offices 65,000 Leased Oct-24 Maysville, OK Manufacturing, Warehousing and Offices 36,700 Owned N/A Souderton, PA Manufacturing, Warehousing and Offices 50,000 Owned N/A Plano, TX Manufacturing, Warehousing and Offices 339,100 Leased Apr-25 Waynesboro, VA Manufacturing, Warehousing and Offices 26,400 Owned N/A Bothell, WA Manufacturing, Warehousing and Offices 23,600 Leased May-25 Appleton, WI Manufacturing, Warehousing and Offices 20,000 Owned N/A Lodi, WI Manufacturing, Warehousing and Offices 114,600 Owned N/A Aalborg, Denmark Manufacturing, Warehousing and Offices 68,300 Leased Dec-25 Mauron, France Manufacturing, Warehousing and Offices 107,200 Leased Jan-23 Reichenau, Germany Manufacturing, Warehousing and Offices 57,900 Owned N/A Bangalore, India Manufacturing, Warehousing and Offices 75,000 Leased Mar-24 Casarsa della Delizia, Italy Manufacturing, Warehousing and Offices 109,200 Leased May-33 Castelnuovo Rangone, Italy Manufacturing, Warehousing and Offices 26,800 Leased Aug-24 Piumazzo, Italy Manufacturing, Warehousing and Offices 32,900 Leased Mar-30 Vicenza, Italy Manufacturing, Warehousing and Offices 53,500 Owned N/A Norwich, the United Kingdom Manufacturing, Warehousing and Offices 30,000 Owned N/A Residential Kitchen: Chino, CA Warehousing and Offices 100,000 Leased Apr-27 Redwood City, CA Warehousing and Offices 20,600 Leased Jul-24 Atlanta, GA Warehousing and Offices 169,200 Leased Dec-24 Buford, GA Warehousing and Offices 178,100 Leased Jun-23 Columbus, GA Warehousing and Offices 148,800 Leased Jun-23 Greenville, MI Manufacturing, Warehousing and Offices 225,000 Owned N/A Greenwood, MS** Manufacturing, Warehousing and Offices 740,600 Owned N/A Brown Deer, WI Manufacturing, Warehousing and Offices 165,700 Leased Nov-26 Kuurne, Belgium Manufacturing and Offices 242,300 Owned N/A Saint Ouen L'aumone, France Manufacturing and Warehousing 30,400 Owned N/A Waterford, Ireland Warehousing and Offices 73,000 Leased Jul-27 Ketley, the United Kingdom Manufacturing and Offices 217,300 Owned N/A Leamington Spa, the United Kingdom Manufacturing and Offices 270,200 Owned N/A Leamington Spa, the United Kingdom Manufacturing and Offices 100,300 Leased Aug-29 Nottingham, the United Kingdom Warehousing and Offices 153,100 Owned N/A * Contains two separate manufacturing facilities. ** Contains four separate manufacturing facilities.
At various other locations the company leases small amounts of space for administrative, manufacturing, distribution and sales functions, and in certain instances limited short-term inventory storage. These locations are in Australia, Brazil, Canada, China, Czech Republic, Denmark, Dubai, France, Germany, India, Italy, Mexico, Netherlands, Philippines, Russia, Spain, the United Kingdom and various locations in the United States.
At various other locations the company leases small amounts of space for administrative, manufacturing, distribution and sales functions, and in certain instances limited short-term inventory storage. These locations are in Australia, Brazil, Canada, China, Czech Republic, Denmark, Dubai, France, Germany, India, Italy, Mexico, Netherlands, Philippines, Spain, the United Kingdom and various locations in the United States.
Management believes that these facilities are adequate for the operation of the company's business as presently conducted. 24
Management believes that these facilities are adequate for the operation of the company's business as presently conducted. 23
Item 2. Properties The company's principal executive offices are located in Elgin, Illinois. The company operates thirty-nine manufacturing facilities in the U.S. and twenty-eight manufacturing facilities internationally.
Item 2. Properties The company's principal executive offices are located in Elgin, Illinois. The company operates forty-one manufacturing facilities in the U.S. and thirty-four manufacturing facilities internationally.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeSuch routine claims are vigorously contested and management does not believe that the outcome of any such pending litigation will have a material effect upon the financial condition, results of operations or cash flows of the company. Item 4. Mine Safety Issues Not applicable. 25 PART II
Biggest changeSuch routine claims are vigorously contested and management does not believe that the outcome of any such pending litigation will have a material effect upon the financial condition, results of operations or cash flows of the company. Item 4. Mine Safety Issues Not applicable. 24 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+1 added−0 removed11 unchanged
Biggest changeThe company relied on such exemption based in part upon representations made by Kamado Joe and Masterbuilt, including its status as an accredited investor, as such term is defined in Rule 501 of the Securities Act. 26 Issuer Purchases of Equity Securities Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan or Program Maximum Number of Shares that May Yet be Purchased Under the Plan or Program (1) October 3, 2021 to October 30, 2021 — $ — — 1,476,835 October 31, 2021 to November 27, 2021 — — — 1,476,835 November 28, 2021 to January 1, 2022 141,500 188.17 141,500 1,335,335 Quarter ended January 1, 2022 141,500 $ 188.17 141,500 1,335,335 (1) In November 2017, the company's Board of Directors approved a stock repurchase program.
Biggest changeThe company relied on such exemption based in part upon representations made by Kamado Joe and Masterbuilt, including its status as an accredited investor, as such term is defined in Rule 501 of the Securities Act. 25 Issuer Purchases of Equity Securities Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan or Program Maximum Number of Shares that May Yet be Purchased Under the Plan or Program (1) October 2, 2022 to October 29, 2022 — $ — — 2,469,737 October 30, 2022 to November 26, 2022 — — — 2,469,737 November 27, 2022 to December 31, 2022 188,363 132.66 188,363 2,281,374 Quarter ended December 31, 2022 188,363 $ 132.66 188,363 2,281,374 (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.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Principal Market The company's Common Stock trades on the Nasdaq Global Select Market under the symbol "MIDD". Stockholders The company estimates there were approximately 69,204 record holders of the company's common stock as of February 28, 2022.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Principal Market The company's Common Stock trades on the Nasdaq Global Select Market under the symbol "MIDD". Stockholders The company estimates there were approximately 54,820 record holders of the company's common stock as of February 27, 2023.
These withheld shares are not considered common stock repurchases under the authorized common stock repurchase plan and accordingly are not included in the common stock repurchase totals in the preceding table. 27
These withheld shares are not considered common stock repurchases under the authorized common stock repurchase plan and accordingly are not included in the common stock repurchase totals in the preceding table. Item 6. [Reserved] 26
This program authorizes the company to repurchase in the aggregate up to 2,500,000 shares of its outstanding common stock in open market purchases or negotiated transactions. As of January 1, 2022, 1,164,665 shares had been purchased under the 2017 stock repurchase program. At January 1, 2022, the company had a total of 8,170,276 shares in treasury amounting to $566.4 million.
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.
Added
As of December 31, 2022, the total number of shares authorized for repurchase under the program is 5,000,000. As of December 31, 2022, 2,718,626 shares had been purchased under the stock repurchase program and 2,281,374 shares remained authorized for repurchase.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

54 edited+29 added−22 removed78 unchanged
Biggest changeRisk Factors" of this filing and discussion of risks included in the company's SEC filings. 28 NET SALES SUMMARY (dollars in thousands) Fiscal Year Ended (1) 2021 2020 2019 Sales Percent Sales Percent Sales Percent Business Segments: Commercial Foodservice $ 2,032,761 62.5 % $ 1,510,279 60.1 % $ 1,984,345 67.1 % Food Processing 480,746 14.8 437,272 17.4 400,951 13.5 Residential Kitchen 737,285 22.7 565,706 22.5 574,150 19.4 Total $ 3,250,792 100.0 % $ 2,513,257 100.0 % $ 2,959,446 100.0 % (1) The company's fiscal year ends on the Saturday nearest to December 31. 29 Results of Operations The following table sets forth certain items in the consolidated statements of earnings as a percentage of net sales for the periods presented: Fiscal Year Ended (1) 2021 2020 2019 Net sales 100.0 % 100.0 % 100.0 % Cost of sales 63.2 64.9 62.7 Gross profit 36.8 35.1 37.3 Selling, general and administrative expenses 20.5 21.2 20.1 Restructuring 0.3 0.5 0.3 Merger termination fee (3.4) — — Gain on litigation settlement — — (0.5) Gain on sale of plant — (0.1) — Impairments — 0.6 — Income from operations 19.4 12.9 17.4 Interest expense and deferred financing amortization, net 1.8 3.1 2.9 Net periodic pension benefit (other than service cost & curtailment) (1.4) (1.6) (1.0) Curtailment loss — 0.6 — Other expense (income), net — 0.1 (0.1) Earnings before income taxes 19.0 10.7 15.6 Provision for income taxes 4.0 2.4 3.7 Net earnings 15.0 % 8.3 % 11.9 % (1) The company's fiscal year ends on the Saturday nearest to December 31. 30 Fiscal Year Ended January 1, 2022 as Compared to January 2, 2021 NET SALES .
Biggest changeNET SALES SUMMARY (dollars in thousands) Fiscal Year Ended (1) 2022 2021 2020 Sales Percent Sales Percent Sales Percent Business Segments: Commercial Foodservice $ 2,410,266 59.8 % $ 2,032,761 62.5 % $ 1,510,279 60.1 % Food Processing 574,465 14.2 480,746 14.8 437,272 17.4 Residential Kitchen 1,048,122 26.0 737,285 22.7 565,706 22.5 Total $ 4,032,853 100.0 % $ 3,250,792 100.0 % $ 2,513,257 100.0 % (1) The company's fiscal year ends on the Saturday nearest to December 31. 28 Results of Operations The following table sets forth certain items in the consolidated statements of earnings as a percentage of net sales for the periods presented: Fiscal Year Ended (1) 2022 2021 2020 Net sales 100.0 % 100.0 % 100.0 % Cost of sales 64.1 63.2 64.9 Gross profit 35.9 36.8 35.1 Selling, general and administrative expenses 19.8 20.5 21.2 Restructuring 0.2 0.3 0.5 Merger termination fee — (3.4) — Gain on sale of plant — — (0.1) Impairments — — 0.6 Income from operations 15.9 19.4 12.9 Interest expense and deferred financing amortization, net 2.2 1.8 3.1 Net periodic pension benefit (other than service cost & curtailment) (1.0) (1.4) (1.6) Curtailment loss — — 0.6 Other expense (income), net 0.7 — 0.1 Earnings before income taxes 14.0 19.0 10.7 Provision for income taxes 3.2 4.0 2.4 Net earnings 10.8 % 15.0 % 8.3 % (1) The company's fiscal year ends on the Saturday nearest to December 31. 29 Fiscal Year Ended December 31, 2022 as Compared to January 1, 2022 NET SALES .
Gross profit increased by $312.9 million to $1,194.9 million in fiscal 2021 from $882.0 million in fiscal 2020, primarily reflecting higher sales volumes related to improvements in market conditions and consumer demand and the favorable impact of foreign exchange rates of $14.0 million. The gross margin rate increased to 36.8% in 2021 as compared to 35.1% in 2020.
Gross profit increased by $312.9 million to $1,194.9 million in fiscal 2021 from $882.0 million in fiscal 2020, primarily reflecting higher sales volumes related to improvements in market conditions and consumer demand and the favorable impact of foreign exchange rates of $14.0 million. The gross profit margin rate increased to 36.8% in 2021 as compared to 35.1% in 2020.
Excluding acquisitions, the gross profit increased by approximately $203.6 million related to higher sales volumes. The impact of foreign exchange rates increased gross profit by approximately $6.7 million. The gross profit margin rate increased to 37.0% in fiscal 2021 as compared to 34.6% in the prior year.
Excluding acquisitions, gross profit increased by approximately $203.6 million related to higher sales volumes. The impact of foreign exchange rates increased gross profit by approximately $6.7 million. The gross profit margin rate increased to 37.0% in fiscal 2021 as compared to 34.6% in the prior year.
The gross margin rate in fiscal 2021 excluding acquisitions and the impact of foreign exchange was 37.1%. • Gross profit at the Food Processing Equipment Group increased by $17.1 million, or 10.9%, to $174.2 million in fiscal 2021 as compared to $157.1 million in fiscal 2020. The impact of foreign exchange rates increased gross profit by approximately $2.0 million.
The gross profit margin rate in fiscal 2021 excluding acquisitions and the impact of foreign exchange was 37.1%. • Gross profit at the Food Processing Equipment Group increased by $17.1 million, or 10.9%, to $174.2 million in fiscal 2021 as compared to $157.1 million in fiscal 2020. The impact of foreign exchange rates increased gross profit by approximately $2.0 million.
The gross margin rate in fiscal 2021 excluding the impact of foreign exchange was 36.1%. • Gross profit at the Residential Kitchen Equipment Group increased by $64.3 million, or 31.5%, to $268.6 million in fiscal 2021 as compared to $204.3 million in fiscal 2020. Gross profit from acquisitions increased gross profit by $11.0 million.
The gross profit margin rate in fiscal 2021 excluding the impact of foreign exchange was 36.1%. • Gross profit at the Residential Kitchen Equipment Group increased by $64.3 million, or 31.5%, to $268.6 million in fiscal 2021 as compared to $204.3 million in fiscal 2020. Gross profit from acquisitions increased gross profit by $11.0 million.
Excluding acquisitions, the gross profit increased by approximately $53.3 million related to higher sales volumes. The impact of foreign exchange rates increased gross profit by approximately $5.3 million. The gross margin rate increased to 36.4% in fiscal 2021 as compared to 36.1% in the prior year.
Excluding acquisitions, gross profit increased by approximately $53.3 million related to higher sales volumes. The impact of foreign exchange rates increased gross profit by approximately $5.3 million. The gross margin rate increased to 36.4% in fiscal 2021 as compared to 36.1% in the prior year.
Material Cash Requirements The company's material cash requirements from contractual obligations primarily consist of long-term debt obligations, operating lease obligations, tax obligations and continent contingent purchase price payments to the sellers that were deferred in conjunction with various acquisitions. See Notes 3, 5 and 7 to the Consolidated Financial Statements for further information.
Material Cash Requirements The company's material cash requirements from contractual obligations primarily consist of long-term debt obligations, operating lease obligations, tax obligations and contingent purchase price payments to the sellers that were deferred in conjunction with various acquisitions. See Notes 3, 5 and 7 to the Consolidated Financial Statements for further information.
The company considers qualitative factors to assess if it is more likely than not that the fair value of goodwill and indefinite-lived intangible assets is below the carrying value. 38 In conducting a qualitative assessment, the company analyzes a variety of events or factors that may influence the fair value of the reporting unit including, but not limited to: the results of prior quantitative assessments performed; changes in the carrying amount of the reporting unit; actual and projected revenue and operating margin; relevant market data for both the company and its peer companies; industry outlooks; macroeconomic conditions; liquidity; changes in key personnel; and the company's competitive position.
The company considers qualitative factors to assess if it is more likely than not that the fair value of goodwill and indefinite-lived intangible assets is below the carrying value. 37 In conducting a qualitative assessment, the company analyzes a variety of events or factors that may influence the fair value of the reporting unit including, but not limited to: the results of prior quantitative assessments performed; changes in the carrying amount of the reporting unit; actual and projected revenue and operating margin; relevant market data for both the company and its peer companies; industry outlooks; macroeconomic conditions; liquidity; changes in key personnel; and the company's competitive position.
The gross margin rate in fiscal 2021 excluding acquisitions and the impact of foreign exchange was 37.5%. SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES . Combined selling, general, and administrative expenses increased by $136.1 million to $668.0 million in fiscal 2021 from $531.9 million in 2020.
The gross profit margin rate in fiscal 2021 excluding acquisitions and the impact of foreign exchange was 37.5%. SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES . Combined selling, general, and administrative expenses increased by $136.1 million to $668.0 million in fiscal 2021 from $531.9 million in 2020.
If actual results are not consistent with management's estimate and assumptions, a material impairment could have an adverse effect on the company's financial condition and results of operations. 39 Indefinite-Life Intangible Valuations In performing a quantitative assessment of indefinite-life intangible assets other than goodwill, primarily trademarks and trade names, we analyze the variety of events or factors that may impact the fair value of the indefinite-life intangible, including, but not limited to: macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and other relevant factors.
If actual results are not consistent with management's estimate and assumptions, a material impairment could have an adverse effect on the company's financial condition and results of operations. 38 Indefinite-Life Intangible Valuations In performing a quantitative assessment of indefinite-life intangible assets other than goodwill, primarily trademarks and trade names, we analyze the variety of events or factors that may impact the fair value of the indefinite-life intangible, including, but not limited to: macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and other relevant factors.
Whether the more-likely-than-not recognition threshold is met for a particular tax benefit is a matter of judgment based on the individual facts and circumstances evaluated in light of all available evidence as of the balance sheet date. 41 New Accounting Pronouncements See Note 3(r) to the Consolidated Financial Statements for further information on the new accounting pronouncements.
Whether the more-likely-than-not recognition threshold is met for a particular tax benefit is a matter of judgment based on the individual facts and circumstances evaluated in light of all available evidence as of the balance sheet date. 40 New Accounting Pronouncements See Note 3(r) to the Consolidated Financial Statements for further information on the new accounting pronouncements.
Additional risks and uncertainties not currently known to the company or that it currently deems immaterial may impair its business operations. If any of the risks identified in "Item 1A. Risk Factors" actually occurs, the company's business, results of operations and financial condition could be materially adversely affected, and the trading price of the company's common stock could decline. 42
Additional risks and uncertainties not currently known to the company or that it currently deems immaterial may impair its business operations. If any of the risks identified in "Item 1A. Risk Factors" actually occurs, the company's business, results of operations and financial condition could be materially adversely affected, and the trading price of the company's common stock could decline. 41
If actual results are not consistent with management's estimate and assumptions, a material impairment charge of our trademarks and trade names could occur, which could have an adverse effect on the company's financial condition and results of operations. 40 Convertible Debt The company issued convertible debt with debt and equity components.
If actual results are not consistent with management's estimate and assumptions, a material impairment charge of our trademarks and trade names could occur, which could have an adverse effect on the company's financial condition and results of operations. 39 Convertible Debt The company issued convertible debt with debt and equity components.
In fiscal 2021, there were no impairments recognized in the Consolidated Financial Statements. 32 INCOME FROM OPERATIONS . Income from operations increased $305.6 million to $630.0 million in fiscal 2021 from $324.4 million in fiscal 2020. Operating income as a percentage of net sales amounted to 19.4% in 2021 as compared to 12.9% in 2020.
In fiscal 2021, there were no impairments recognized in the Consolidated Financial Statements. 34 INCOME FROM OPERATIONS . Income from operations increased $305.6 million to $630.0 million in fiscal 2021 from $324.4 million in fiscal 2020. Operating income as a percentage of net sales amounted to 19.4% in 2021 as compared to 12.9% in 2020.
Excluding acquisitions, the disposition, and foreign exchange, the net sales increase in international sales was $49.6 million, or 28.7%. The increase in domestic and international sales reflects the strong demand for our premium appliance brands and strength in the European market. 31 GROSS PROFIT .
Excluding acquisitions, the disposition, and foreign exchange, the net sales increase in international sales was $49.6 million, or 28.7%. The increase in domestic and international sales reflects the strong demand for our premium appliance brands and strength in the European market. 33 GROSS PROFIT .
Related Party Transactions From January 3, 2021 through the date hereof, there were no transactions between the company, its directors and executive officers that are required to be disclosed pursuant to Item 404 of Regulation S-K, promulgated under the Securities and Exchange Act of 1934, as amended. 37 Critical Accounting Policies and Estimates Management's discussion and analysis of financial condition and results of operations are based upon the company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
Related Party Transactions From January 2, 2022, through the date hereof, there were no transactions between the company, its directors and executive officers that are required to be disclosed pursuant to Item 404 of Regulation S-K, promulgated under the Securities and Exchange Act of 1934, as amended. 36 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.
In connection with the company’s acquisition activities, the company added assets and liabilities from the opening balance sheets of the acquired businesses in its consolidated balance sheets and accordingly these amounts are not reflected in the net changes in working capital. INVESTING ACTIVITIES. During 2021, net cash used for investing activities amounted to $1.0 billion.
In connection with the company’s acquisition activities, the company added assets and liabilities from the opening balance sheets of the acquired businesses in its consolidated balance sheets and accordingly these amounts are not reflected in the net changes in working capital. INVESTING ACTIVITIES. During 2022, net cash used for investing activities amounted to $348.3 million.
The effective rates in 2021 and 2020 are higher than the federal tax rate of 21% primarily due to state taxes and foreign tax rate differentials. 33 Fiscal Year Ended January 2, 2021 as Compared to December 28, 2019 NET SALES .
The effective rates in 2022 and 2021 are higher than the federal tax rate of 21% primarily due to state taxes and foreign tax rate differentials. 32 Fiscal Year Ended January 1, 2022 as Compared to January 2, 2021 NET SALES .
At January 1, 2022, the company was in compliance with all covenants pursuant to its borrowing agreements.
At December 31, 2022, the company was in compliance with all covenants pursuant to its borrowing agreements.
The effective rates in 2020 and 2019 are higher than the federal tax rate of 21% primarily due to state taxes and foreign tax rate differentials. 36 Financial Condition and Liquidity Total cash and cash equivalents decreased by $87.7 million to $180.4 million at January 1, 2022 from $268.1 million at January 2, 2021.
The effective rates in 2021 and 2020 are higher than the federal tax rate of 21% primarily due to state taxes and foreign tax rate differentials. 35 Financial Condition and Liquidity Total cash and cash equivalents decreased by $18.4 million to $162.0 million at December 31, 2022 from $180.4 million at January 1, 2022.
As a percentage of net sales, selling, general and administrative expenses amounted to 21.2% in fiscal 2020 and 20.1% in fiscal 2019. Selling, general and administrative expenses reflect increased costs of $30.2 million associated with acquisitions, including $7.2 million of non-cash intangible amortization expense.
As a percentage of net sales, selling, general and administrative expenses amounted to 19.8% in fiscal 2022 and 20.5% in fiscal 2021. Selling, general and administrative expenses reflect increased costs of $88.1 million associated with acquisitions, including $22.7 million of non-cash intangible amortization expense.
The company continues to monitor the global impacts of the COVID-19 pandemic to assess the outlook for demand of its products and the impact on its business and financial performance.
The company continues to monitor the impacts from the COVID-19 pandemic and subsequent accelerated recovery, along with inflationary impacts from the war in Ukraine to assess the outlook for demand of its products and the impact on its business and financial performance.
Domestically, the company realized a sales decrease of $266.9 million, or 20.0%, to $1,067.9 million, as compared to $1,334.8 million in the prior year. This includes an increase of $43.0 million from recent acquisitions. Excluding acquisitions, the net decrease in domestic sales was $309.9 million, or 23.2%.
Domestically, the company realized a sales increase of $247.5 million, or 54.5%, to $701.9 million, as compared to $454.4 million in the prior year. This includes an increase of $204.2 million from recent acquisitions. Excluding acquisitions, the net increase in domestic sales was $43.3 million, or 9.5%.
Excluding the impact of acquisitions, net sales of the Commercial Foodservice Equipment Group decreased $527.1 million, or 26.6%, as compared to the prior year. Excluding the impact of foreign exchange and acquisitions, net sales decreased $525.6 million, or 26.5% at the Commercial Foodservice Equipment Group.
Excluding the impact of acquisitions, net sales of the Residential Kitchen Equipment Group increased $3.1 million, or 0.4%, as compared to the prior year. Excluding the impact of foreign exchange and acquisitions, net sales increased $31.6 million, or 4.3% at the Residential Kitchen Equipment Group.
This compares to $110.0 million of non-cash expenses in the prior year, including $37.9 million of depreciation expense, $64.0 million of intangible amortization related to acquisitions and $8.1 million of stock based compensation costs. NON-OPERATING EXPENSES . Non-operating expenses increased $5.0 million to $56.4 million of expense in fiscal 2020 from $51.4 million of income in fiscal 2019.
This compares to $160.8 million of non-cash expenses in the prior year, including $42.7 million of depreciation expense, $75.8 million of intangible amortization related to acquisitions and $42.3 million of stock based compensation costs. 31 NON-OPERATING EXPENSES . Non-operating expenses increased $64.7 million to $75.2 million of expense in fiscal 2022 from $10.5 million of expense in fiscal 2021.
International sales decreased $207.1 million, or 31.9%, to $442.4 million, as compared to $649.5 million in the prior year. This includes the increase of $10.1 million from recent acquisitions and a decrease of $1.5 million related to the unfavorable impact of exchange rates. Excluding acquisitions and foreign exchange, the net sales decrease in international sales was $215.7 million, or 33.2%.
International sales increased $30.2 million, or 22.6%, to $163.6 million, as compared to $133.4 million in the prior year. This includes the increase of $30.0 million from recent acquisitions and a decrease of $16.2 million related to the unfavorable impact of exchange rates. Excluding acquisitions and foreign exchange, the net sales increase in international sales was $16.4 million, or 12.3%.
This was comprised of $2.7 million to repurchase 15,480 shares of Middleby common stock that were surrendered to the company for withholding taxes related to restricted stock vestings and $26.6 million used to repurchase 141,500 shares of its common stock under a repurchase program.
Additionally, the company repurchased $264.8 million of Middleby common shares during 2022. This was comprised of $15.8 million to repurchase 90,243 shares of Middleby common stock that were surrendered to the company for withholding taxes related to restricted stock vestings and $249.0 million used to repurchase 1,553,961 shares of its common stock under a repurchase program.
The impact of foreign exchange rates on foreign sales translated into U.S. Dollars for fiscal 2020 increased net sales by approximately $0.2 million.
Excluding acquisitions, net sales increased $348.5 million, or 10.7%, from the prior year. The impact of foreign exchange rates on foreign sales translated into U.S. Dollars for fiscal 2022 decreased net sales by approximately $85.0 million.
Excluding the impact of foreign exchange and acquisitions, sales decreased 17.5% for the year, including a net sales decrease of 26.5% at the Commercial Foodservice Equipment Group, a net sales increase of 5.9% at the Food Processing Equipment Group and a net sales decrease of 2.9% at the Residential Kitchen Equipment Group. • Net sales of the Commercial Foodservice Equipment Group decreased by $474.0 million, or 23.9%, to $1,510.3 million in fiscal 2020 as compared to $1,984.3 million in fiscal 2019.
Excluding the impact of foreign exchange and acquisitions, sales increased 13.3% for the year, including a net sales increase of 16.4% at the Commercial Foodservice Equipment Group, a net sales increase of 14.3% at the Food Processing Equipment Group and a net sales increase of 4.3% at the Residential Kitchen Equipment Group. • Net sales of the Commercial Foodservice Equipment Group increased by $377.5 million, or 18.6%, to $2,410.3 million in fiscal 2022 as compared to $2,032.8 million in fiscal 2021.
The gross margin rate in fiscal 2020 excluding acquisitions and the impact of foreign exchange was 34.9%. • Gross profit at the Food Processing Equipment Group increased by $14.9 million, or 10.5%, to $157.1 million in fiscal 2020 as compared to $142.2 million in fiscal 2019. Excluding the acquisition, gross profit increased by approximately $10.6 million.
The gross profit margin rate in fiscal 2022 excluding acquisitions and the impact of foreign exchange was 38.0%. • Gross profit at the Food Processing Equipment Group increased by $33.2 million, or 19.1%, to $207.4 million in fiscal 2022 as compared to $174.2 million in fiscal 2021. Gross profit from acquisitions increased gross profit by $12.2 million.
The impact of foreign exchange rates increased gross profit by approximately $0.4 million. The gross profit margin rate increased to 35.9% in fiscal 2020 as compared to 35.5% in the prior year.
Gross profit from acquisitions increased gross profit by $29.8 million. Excluding acquisitions, gross profit increased by $131.9 million related to higher sales volumes. The impact of foreign exchange rates decreased gross profit by approximately $15.2 million. The gross profit margin rate increased to 37.9% in fiscal 2022 as compared to 37.0% in the prior year.
The gross margin rate in fiscal 2020 excluding the acquisition and the impact of foreign exchange was 35.9%. • Gross profit at the Residential Kitchen Equipment Group decreased by $12.5 million, or 5.8%, to $204.3 million in fiscal 2020 as compared to $216.8 million in fiscal 2019. The impact of foreign exchange rates increased gross profit by approximately $1.2 million.
The gross profit margin rate in fiscal 2022 excluding the impact of foreign exchange was 36.9%. • Gross profit at the Residential Kitchen Equipment Group increased by $57.2 million, or 21.3%, to $325.8 million in fiscal 2022 as compared to $268.6 million in fiscal 2021. Gross profit from acquisitions increased gross profit by $54.8 million.
The company performed a qualitative assessment as of October 3, 2021 over all three reporting units and as a result of the qualitative assessments, the company determined it is more likely than not that the fair value of our reporting units are greater than the carrying amounts.
The fair value of the reporting unit exceeded its carrying value by nearly 20% and no impairment of goodwill was recognized. As a result of the qualitative assessment for the other two reporting units, the company determined it is more likely than not that the fair value of our reporting units are greater than the carrying amounts.
The impact of foreign exchange rates increased gross profit by approximately $0.1 million. The gross profit margin rate decreased to 34.6% as compared to 37.6% in the prior year, primarily due to lower margins at recent acquisitions.
Excluding acquisitions, gross profit increased by $21.0 million related to higher sales volumes. The impact of foreign exchange rates decreased gross profit by approximately $7.3 million. The gross profit margin rate decreased to 36.1% in fiscal 2022 as compared to 36.2% in the prior year.
Excluding the acquisition and foreign exchange, the net sales decrease in international sales was $28.0 million, or 18.1%.
Excluding acquisitions and foreign exchange, the net sales increase in international sales was $72.7 million, or 12.2%.
OPERATING ACTIVITIES . Net cash provided by operating activities after changes in assets and liabilities amounted to $423.4 million as compared to $524.8 million in the prior year. During fiscal 2021, the company received approximately $67.7 million in a termination fee, net of deal costs and taxes.
Income from operations increased $9.6 million to $639.6 million in fiscal 2022 from $630.0 million in fiscal 2021. Operating income as a percentage of net sales amounted to 15.9% in 2022 as compared to 19.4% in 2021. During fiscal 2021, the company received approximately $67.7 million in a termination fee, net of deal costs and taxes.
If the estimated fair value of the indefinite-life intangible asset is less than its carrying value, we would recognize an impairment loss.
If the estimated fair value of the indefinite-life intangible asset is less than its carrying value, we would recognize an impairment loss. Based on the qualitative assessment as of October 2, 2022, the company identified several trademarks and trade names with indicators of potential risk for impairment and performed quantitative assessments.
Excluding the impact of foreign exchange and the acquisition of Pacproinc, acquired July 16, 2019, net sales increased $23.8 million, or 5.9% at the Food Processing Equipment Group. Domestically, the company realized a sales increase of $64.5 million, or 26.2%, to $311.1 million, as compared to $246.6 million in the prior year.
Excluding the impact of acquisitions, net sales of the Food processing Equipment Group increased $52.5 million, or 10.9%, as compared to the prior year. Excluding the impact of foreign exchange and acquisitions, net sales increased $68.7 million, or 14.3% at the Food Processing Equipment Group.
The company considers the implied control premium and conclude whether it is reasonable based on other recent market transactions.
The company considers the implied control premium and conclude whether it is reasonable based on other recent market transactions. The company performed a qualitative assessment as of October 2, 2022. As a result of the financial performance indicators for the Residential Kitchen reporting unit, the company completed a quantitative analysis.
Excluding the acquisition, net sales increased $51.8 million, or 21.0%. The increase in domestic sales reflects growth in protein equipment sales. International sales decreased $28.2 million, or 18.3%, to $126.2 million, as compared to $154.4 million in the prior year. This includes a decrease of $1.1 million related to the unfavorable impact of exchange rates.
The increase in domestic sales reflects the strong demand for our premium appliance brands. International sales increased $63.3 million, or 22.4% to $346.2 million, as compared to $282.9 million in the prior year. This includes an increase of $103.5 million from recent acquisitions and a decrease of $28.5 million related to the unfavorable impact of exchange rates.
Income from operations in 2020 included $127.7 million of non-cash expenses, including $39.1 million of depreciation expense, $69.0 million of intangible amortization related to acquisitions and $19.6 million of stock based compensation.
The increase in operating income resulted from increased sales volumes driven by acquisitions and improved market conditions. Income from operations in 2022 included $189.3 million of non-cash expenses, including $44.6 million of depreciation expense, $86.3 million of intangible amortization related to acquisitions and $58.4 million of stock based compensation.
Based on the qualitative assessment as of October 3, 2021, the company determined it is more likely than not that the fair value of its other indefinite-life intangible assets are greater than the carrying amounts and no quantitative analyses were required.
The fair values of all other trademarks exceeded their carrying values by an amount sufficient to not be deemed "at risk." The company performed a qualitative assessment as of October 2, 2022 for all other trademarks and trade names and determined it is more like than not that the fair value of its other indefinite-life intangible assets are greater than the carrying amounts.
During fiscal 2019, restructuring charges related primarily to headcount reductions and cost reduction initiatives related to facility consolidations at the Commercial Foodservice Equipment Group and Residential Kitchen Equipment Group. GAIN ON LITIGATION SETTLEMENT.
In fiscal 2022, restructuring expenses related primarily to headcount reductions and facility consolidations within the Commercial Foodservice Equipment Group and Residential Kitchen Equipment Group and non-cash restructuring valuation allowances on balances associated with activities in Russia. During fiscal 2021, restructuring charges related primarily to headcount reductions and facility consolidations within the Commercial Foodservice Equipment Group. INCOME FROM OPERATIONS .
The gross margin rate in fiscal 2020 excluding acquisitions and impact of foreign exchange was 35.3%. • Gross profit at the Commercial Foodservice Equipment Group decreased by $224.4 million, or 30.1%, to $522.2 million in fiscal 2020 as compared to $746.6 million in fiscal 2019.
The gross profit margin rate decreased to 35.9% in 2022 as compared to 36.8% in 2021. The gross margin rate in fiscal 2022 excluding acquisitions and impact of foreign exchange was 37.5%.
Cash used to fund acquisitions and investments amounted to $963.6 million primarily for the acquisitions of Novy, Imperial, Kamado Joe and Masterbuilt and Char-Griller. Additionally, $46.6 million was expended, primarily for upgrades of production equipment, manufacturing facilities and residential and commercial showrooms. We received $6.3 million in proceeds on the sale of properties following facility consolidations actions. FINANCING ACTIVITIES.
Cash used to fund acquisitions and investments amounted to $278.8 million . Additionally, $67.3 million was expended, primarily for upgrades of production equipment and manufacturing facilities. FINANCING ACTIVITIES. Net cash flows provided by financing activities amounted to $7.6 million in 2022. The company’s borrowing activities during 2022 included $314.8 million of net proceeds under its Credit Facility.
In comparison to the prior year, the tax provision reflects favorable tax adjustments for deferred tax rate changes and adjustments for the finalization of 2019 tax returns.
The fiscal 2022 tax provision also reflects higher non-deductible stock compensation expense, where the prior year included favorable impacts from tax rate changes, tax refunds and adjustments for the finalization of 2020 tax returns.
Excluding foreign exchange, the net sales decrease in international sales was $22.4 million, or 10.6%, primarily in the European market, reflecting the impacts of Brexit and the outbreak of COVID-19 partially offset by strong consumer demand in the last six months of the year. 34 GROSS PROFIT .
Excluding acquisitions and foreign exchange, the net sales decrease in international sales was $11.7 million, or 4.1%. The decrease in international sales was primarily driven by challenging market conditions in the European market. 30 GROSS PROFIT .
Selling, general and administrative expenses decreased by $35.7 million related to compensation costs and commissions and $59.2 million due to controllable cost reductions primarily within professional fees, travel and entertainment, convention costs, and advertising. Foreign exchange rates had a favorable impact of $0.5 million.
Selling, general and administrative expenses increased from compensation, selling and commissions expenses, partially offset by lower professional fees and intangible amortization expense. Foreign exchange rates had a favorable impact of $15.1 million. RESTRUCTURING EXPENSES. Restructuring expenses increased $2.0 million to $9.7 million from $7.7 million in the prior year period.
Excluding the impact of foreign exchange, the acquisition of Brava, acquired November, 19, 2019, net sales decreased $16.8 million, or 2.9% at the Residential Kitchen Equipment Group. Domestically, the company realized a sales increase of $11.2 million, or 3.1%, to $373.9 million, as compared to $362.7 million in the prior year.
Excluding the impact of acquisitions, net sales of the Commercial Foodservice Equipment Group increased $292.9 million, or 14.4%, as compared to the prior year. Excluding the impact of foreign exchange and acquisitions, net sales increased $333.2 million, or 16.4% at the Commercial Foodservice Equipment Group.
During fiscal 2020, a curtailment cost of approximately $14.7 million was recognized as a result of closing the AGA Group Pension Scheme to future pension accruals. INCOME TAXES . A tax provision of $60.8 million, at an effective rate of 22.7%, was recorded for fiscal 2020 as compared to $110.4 million at an effective rate of 23.9%, in fiscal 2019.
A tax provision of $127.8 million, at an effective rate of 22.7%, was recorded for fiscal 2022 as compared to $131.0 million at an effective rate of 21.1%, in fiscal 2021.
The decrease in international revenues reflects declines in sales primarily due to the disruptive impact of COVID-19 on our customers' operations. • Net sales of the Residential Kitchen Equipment Group decreased by $8.4 million, or 1.5%, to $565.7 million in fiscal 2020, as compared to $574.1 million in fiscal 2019.
The increase in international sales reflects growth primarily driven by protein products. • Net sales of the Residential Kitchen Equipment Group increased by $310.8 million, or 42.2%, to $1,048.1 million in fiscal 2022, as compared to $737.3 million in fiscal 2021.
International sales decreased $19.6 million, or 9.3% to $191.8 million, as compared to $211.4 million in the prior year. This includes an increase of $2.8 million related to the favorable impact of exchange rates.
The increase in domestic sales is related to improvements in market conditions, consumer demand, and pricing increases. International sales increased $46.3 million, or 7.7%, to $644.0 million, as compared to $597.7 million in the prior year. This includes the increase of $13.9 million from recent acquisitions and a decrease of $40.3 million related to the unfavorable impact of exchange rates.
Gross profit decreased by $221.5 million to $882.0 million in fiscal 2020 from $1,103.5 million in fiscal 2019, primarily reflecting the lower sales volumes related to COVID-19 and lower margins at recent acquisitions, offset by the favorable impact of foreign exchange rates of $1.7 million. The gross margin rate decreased from 37.3% in 2019 to 35.1% in 2020.
Gross profit increased by $251.7 million to $1,446.6 million in fiscal 2022 from $1,194.9 million in fiscal 2021, primarily reflecting higher sales volumes related to improvements in market conditions and consumer demand, partially offset by the unfavorable impact of foreign exchange rates of $33.1 million.
Net sales from the acquisitions of Cooking Solutions Group, Powerhouse, Ss Brewtech, Synesso, RAM, Deutsche, Wild Goose, and United Foodservice Equipment Zhuhai, which were acquired on April 1, 2019, April 1, 2019, June 15, 2019, November 27, 2019, January 13, 2020, March 2, 2020, December 7, 2020, and December 18, 2020, respectively, accounted for an increase of $53.1 million during fiscal 2020.
Net sales from the acquisitions of Novy, Char-Griller, and Kamado Joe and Masterbuilt, which were acquired on July 12, 2021, December 27, 2021, and December 27, 2021, respectively, accounted for an increase of $307.7 million during fiscal 2022.
Removed
Net sales in fiscal 2020 decreased by $446.1 million, or 15.1%, to $2,513.3 million as compared to $2,959.4 million in fiscal 2019.
Added
Risk Factors" of this filing and discussion of risks included in the company's SEC filings. 27 COVID-19 Update The global coronavirus ("COVID-19") pandemic and associated counteracting measures implemented by governments and businesses around the world, as well as subsequent accelerated recovery in global business activity, have increased uncertainty in the global business environment and led to supply chain disruptions and shortages in global markets for commodities, logistics and labor, as well as input cost inflation.
Removed
Net sales increased by $72.3 million, or 2.4%, from the fiscal 2019 acquisitions of Cooking Solutions Group, Powerhouse, Ss Brewtech, Pacproinc, Brava, and Synesso and the fiscal 2020 acquisitions of RAM, Deutsche, Wild Goose, and United Foodservice Equipment Zhuhai. Excluding acquisitions, net sales decreased $518.4 million, or 17.5%, from the prior year.
Added
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, most notably in our residential segment, have faced recent demand headwinds.
Removed
The decline in both domestic and international sales reflects the impacts of COVID-19.
Added
While facing headwinds, including a highly inflationary environment, we remain committed to executing productivity and profitability initiatives to address margin challenges, combined with diligent pricing actions where possible.
Removed
This was most prevalent in the second quarter of 2020 and despite the decline over the prior year, gradually recovered in the second half of the year. • Net sales of the Food Processing Equipment Group increased by $36.3 million, or 9.1%, to $437.3 million in fiscal 2020, as compared to $401.0 million in fiscal 2019.
Added
The limited availability of certain product components has resulted in lengthened lead times and higher input costs, including labor, energy, freight, logistics, and in some cases, has impacted our ability to meet customer demand. The company expects input costs to remain elevated for some period of time, which we are working to mitigate.
Removed
Excluding the acquisition, net sales increased $5.6 million, or 1.5%. The increase in domestic sales is primarily related to strong consumer demand in the last six months of the year, offset by the impacts of COVID-19 in the first half of the year.
Added
The availability of resources and inflationary costs have resulted in heightened inventory levels, impacts margins and placed constraints on our operating cash flows. Heightened backlog levels have also resulted. Our teams are actively evaluating options for alternative suppliers, dual sourcing and collaborating across the organization, where appropriate, without materially presenting new risks or increasing current risks around quality and reliability.
Removed
Gross profit from the acquisitions of Cooking Solutions Group, Powerhouse, Ss Brewtech, Synesso, RAM, Deutsche, Wild Goose, and United Foodservice Equipment Zhuhai, accounted for an approximately $13.0 million increase in gross profit during fiscal 2020. Excluding acquisitions, the gross profit decreased by approximately $237.4 million largely due to lower sales volumes.
Added
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. We remain focused on delivering strong financial results and executing on our long-term strategy and profitability objectives.
Removed
The gross margin rate decreased to 36.1% in fiscal 2020 as compared to 37.8% in the prior year, primarily related to lower sales volumes and the impact of facility consolidations. SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES . Combined selling, general, and administrative expenses decreased by $61.9 million to $531.9 million in fiscal 2020 from $593.8 million in 2019.
Added
The lingering effects of the COVID-19 pandemic, global response measures and corresponding impacts on various markets remain fluid and uncertain and may lead to sudden changes in trajectory and outlook.
Removed
The decreases were partially offset by a $11.5 million increase related to higher non-cash share-based compensation and $5.8 million related to increased allowances for doubtful accounts given the current market conditions. The prior year expenses also included $10.1 million related to transition costs with the former Chairman and CEO upon his retirement in February 2019. RESTRUCTURING EXPENSES.
Added
The company plans to 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.
Removed
Restructuring expenses increased $1.9 million to $12.4 million from $10.5 million in the prior year period. In fiscal 2020, restructuring expenses related primarily to headcount reductions and facility consolidations within the Commercial Foodservice Equipment Group.
Added
Termination of Welbilt Merger As previously disclosed, on April 20, 2021, Middleby entered into a Merger Agreement with Welbilt, Inc.
Removed
In fiscal 2019, the company reached a settlement with respect to a lawsuit filed by the company arising from a prior acquisition included in the Residential Kitchen Equipment Group. The gain associated with this settlement, which is net of the release of funds in escrow, is reflected in the consolidated statement of earnings. IMPAIRMENTS.
Added
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.
Removed
In fiscal 2020, the company recognized impairment of $11.6 million associated with several trade names in conjunction with the diminution of value as we assessed current market conditions and future business plans. See Note 3 (f) to the Consolidated Financial Statements for further information on the annual impairment testing.
Added
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.
Removed
In addition the company recorded an impairment charge of approximately $2.9 million to reflect the fair market value of assets held for sale for a non-core business within the Residential Kitchen Equipment Group. See Note 13, Restructuring and Acquisition Integration Initiatives, in the Notes to the Consolidated Financial Statements for further information on restructuring initiatives. 35 INCOME FROM OPERATIONS .
Added
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.
Removed
Income from operations decreased $189.6 million to $324.4 million in fiscal 2020 from $514.0 million in fiscal 2019. Operating income as a percentage of net sales amounted to 12.9% in 2020 as compared to 17.4% in 2019. The decrease in operating income resulted from the impacts of COVID-19.
Added
Net sales in fiscal 2022 increased by $782.1 million, or 24.1%, to $4,032.9 million as compared to $3,250.8 million in fiscal 2021. Net sales increased by $433.6 million, or 13.3%, from the fiscal 2021 acquisitions of Novy, Imperial, Newton CFV, Char-Griller, Kamado Joe and Masterbuilt and the fiscal 2022 acquisitions of Kloppenberg, Proxaut, Icetro, CP Packaging, Colussi, Escher, and Marco.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+1 added−0 removed5 unchanged
Biggest changeThe company has entered into interest rate swaps to fix the interest rate applicable to certain of its variable-rate debt. The agreements swap one-month LIBOR for fixed rates. The company has designated these swaps as cash flow hedges and all changes in fair value of the swaps are recognized in accumulated other comprehensive income.
Biggest changeThe company has designated these swaps as cash flow hedges and all changes in fair value of the swaps are recognized in accumulated other comprehensive income. As of December 31, 2022, the fair value of these instruments was an asset of $65.0 million.
Changes in the market value and the related foreign exchange gains and losses are recorded in the statement of earnings. 43
Changes in the market value and the related foreign exchange gains and losses are recorded in the statement of earnings. 42
The company does not have economic interest rate exposure as the Convertible Notes have a fixed annual rate of 1.00%. The fair value of the Convertible Notes is subject to interest rate risk, market risk and other factors due to its conversion feature.
As such, the company does not have economic interest rate exposure on the Convertible Notes. The fair value of the Convertible Notes is subject to interest rate risk, market risk and other factors due to its conversion feature.
Foreign Exchange Derivative Financial Instruments The company uses derivative financial instruments, principally foreign currency forward purchase and sale contracts with terms of less than one year, to hedge its exposure to changes in foreign currency exchange rates.
Foreign Exchange Derivative Financial Instruments The company uses derivative financial instruments, principally foreign currency forward purchase and sale contracts with terms of less than one year, to hedge its exposure to changes in foreign currency exchange rates. The company’s primary hedging activities are to mitigate its exposure to changes in exchange rates on intercompany and third-party trade receivables and payables.
As of January 1, 2022, the fair value of these instruments was a liability of $18.0 million. The change in fair value of these swap agreements in the first twelve months of 2021 was a gain of $24.6 million, net of taxes.
The change in fair value of these swap agreements in the first twelve months of 2022 was a gain of $61.6 million, net of taxes.
The potential net loss on fair value for such instruments from a hypothetical 10% adverse change in quoted interest rates would not have a material impact on the company's financial position, results of operations and cash flows. In August 2020, the company issued $747.5 million aggregate principal amount of Convertible Notes in a private offering pursuant to the Indenture.
The potential net loss on fair value for such instruments from a hypothetical 10% adverse change in quoted interest rates would not have a material impact on the company's financial position, results of operations and cash flows. The company has Convertible Notes that were issued in August 2020, which carry a fixed annual interest rate of 1.00%.
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 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.
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: Variable Rate Debt 2022 $ 27,293 2023 23,621 2024 23,634 2025 757,945 2026 and thereafter 1,581,801 $ 2,414,294 The company is exposed to interest rate risk on its floating-rate debt.
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: Variable Rate Debt 2023 $ 45,583 2024 43,788 2025 780,826 2026 1,850,752 2027 and thereafter 1,375 $ 2,722,324 The company is exposed to interest rate risk on its floating-rate debt.
Added
The company has entered into interest rate swaps to fix the interest rate applicable to certain of its variable-rate debt. The agreements swap one-month LIBOR for fixed rates. 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") in lieu of LIBOR.

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