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(Mark One)

or

 

Commission File No. 1-9973

 

(Exact name of registrant as specified in its charter)  

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “accelerated filer," "large accelerated filer," "smaller reporting company," and "emerging growth company” in Rule 12b-2 of the Exchange Act.

 

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

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

As of August 4, 2025, there were 50,682,386 shares of the registrant's common stock outstanding.

 

  

(Unaudited)

 

 

(Unaudited)

 

 

 

(Unaudited)

			Common Stock						Paid-in Capital						Treasury Stock						Retained Earnings						Accumulated Other Comprehensive Income/(loss)						Total Stockholders' Equity
Balance, March 29, 2025			$	148					$	522,665					$	(983,469)					$	4,420,539					$	(229,962)					$	3,729,921
Net earnings			—						—						—						105,956						—						105,956
Currency translation adjustments			—						—						—						—						114,647						114,647
Change in unrecognized pension benefit costs, net of tax of $669			—						—						—						—						(4,222)						(4,222)
Unrealized loss on interest rate swap, net of tax of $(1,102)			—						—						—						—						(3,717)						(3,717)
Stock compensation			—						6,224						—						—						—						6,224
Purchase of treasury stock			—						—						(326,254)						—						—						(326,254)
Balance, June 28, 2025			$	148					$	528,889					$	(1,309,723)					$	4,526,495					$	(123,254)					$	3,622,555
Balance, December 28, 2024			$	148					$	520,177					$	(940,691)					$	4,328,187					$	(269,390)					$	3,638,431
Net earnings			—						—						—						198,308						—						198,308
Currency translation adjustments			—						—						—						—						161,476						161,476
Change in unrecognized pension benefit costs, net of tax of $939			—						—						—						—						(6,174)						(6,174)
Unrealized loss on interest rate swap, net of tax of $(2,803)			—						—						—						—						(9,166)						(9,166)
Stock compensation			—						8,712						—						—						—						8,712
Purchase of treasury stock			—						—						(369,032)						—						—						(369,032)
Balance, June 28, 2025			$	148					$	528,889					$	(1,309,723)					$	4,526,495					$	(123,254)					$	3,622,555

			Common Stock						Paid-in Capital						Treasury Stock						Retained Earnings						Accumulated Other Comprehensive Income/(loss)						Total Stockholders' Equity
Balance, March 30,2024			$	148					$	493,038					$	(923,026)					$	3,986,322					$	(245,243)					$	3,311,239
Net earnings			—						—						—						115,395						—						115,395
Currency translation adjustments			—						—						—						—						(9,528)						(9,528)
Change in unrecognized pension benefit costs, net of tax of $98			—						—						—						—						524						524
Unrealized loss on interest rate swap, net of tax of $748			—						—						—						—						(2,391)						(2,391)
Stock compensation			—						7,648						—						—						—						7,648
Purchase of treasury stock			—						—						(976)						—						—						(976)
Balance, June 29, 2024			$	148					$	500,686					$	(924,002)					$	4,101,717					$	(256,638)					$	3,421,911
Balance, December 30, 2023			$	148					$	479,216					$	(906,031)					$	3,899,754					$	(223,198)					$	3,249,889
Net earnings			—						—						—						201,963						—						201,963
Currency translation adjustments			—						—						—						—						(36,014)						(36,014)
Change in unrecognized pension benefit costs, net of tax of $336			—						—						—						—						1,575						1,575
Unrealized gain on interest rate swap, net of tax of $(856)			—						—						—						—						999						999
Stock compensation			—						21,470						—						—						—						21,470
Purchase of treasury stock			—						—						(17,971)						—						—						(17,971)
Balance, June 29, 2024			$	148					$	500,686					$	(924,002)					$	4,101,717					$	(256,638)					$	3,421,911

(Unaudited)

			Six Months Ended
			Jun 28, 2025						Jun 29, 2024
Cash flows from operating activities--
Net earnings			$	198,308					$	201,963
Adjustments to reconcile net earnings to net cash provided by operating activities--
Depreciation and amortization			64,335						64,056
Non-cash share-based compensation			8,712						21,470
Deferred income taxes			40,612						(18,325)
Net periodic pension benefit (other than service costs)			(3,077)						(7,368)
Other non-cash items			(134)						662
Changes in assets and liabilities, net of acquisitions
Accounts receivable, net			(5,608)						14,793
Inventories, net			(21,412)						7,687
Prepaid expenses and other assets			(20,654)						(419)
Accounts payable			17,662						13,728
Accrued expenses and other liabilities			(15,607)						(7,830)
Net cash provided by operating activities			263,137						290,417
Cash flows from investing activities--
Net additions to property, plant and equipment			(54,651)						(24,680)
Purchase of intangible assets			(1,114)						(80)
Acquisitions, net of cash acquired			(3,491)						(5,557)
Net cash used in investing activities			(59,256)						(30,317)
Cash flows from financing activities--
Repayments under Credit Facility			(21,875)						(21,875)
Net repayments under foreign bank loan			(744)						(1,122)
Payments of deferred purchase price			(15,033)						(1,597)
Repurchase of treasury stock			(365,691)						(17,971)
Other, net			(116)						(110)
Net cash used in financing activities			(403,459)						(42,675)
Effect of exchange rates on cash and cash equivalents			21,544						(5,464)
Changes in cash and cash equivalents--
Net (decrease) increase in cash and cash equivalents			(178,034)						211,961
Cash and cash equivalents at beginning of year			689,533						247,496
Cash and cash equivalents at end of period			$	511,499					$	459,457

 

(Unaudited)

1)Summary of Significant Accounting Policies

a)Basis of Presentation

The condensed consolidated financial statements have been prepared by The Middleby Corporation (the "company" or “Middleby”), pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The financial statements are unaudited and certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the company believes that the disclosures are adequate to make the information not misleading. These financial statements should be read in conjunction with the financial statements and related notes contained in the company's 2024 Form 10-K. The company’s interim results are not necessarily indicative of future full year results for the fiscal year 2025.

In the opinion of management, the financial statements contain all adjustments, which are normal and recurring in nature, necessary to present fairly the financial position of the company as of June 28, 2025 and December 28, 2024, the results of operations for the three and six months ended June 28, 2025 and June 29, 2024, cash flows for the six months ended June 28, 2025 and June 29, 2024 and statement of stockholders' equity for the three and six months ended June 28, 2025 and June 29, 2024.

Certain prior year amounts have been reclassified to be consistent with current year presentation, including beginning to report the results of a division within the company's Food Processing segment as a result of a change in internal management and potential synergies in operations to be consistent with the reporting of financial information used to assess performance and allocate resources. These operations were previously reported in the Commercial Foodservice segment and are now managed and reported in the Food Processing segment. All prior period segment disclosures have been recast to reflect this change.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses. Significant estimates and assumptions are used for, but are not limited to, allowances for doubtful accounts, reserves for excess and obsolete inventories, long-lived and intangible assets, warranty reserves, insurance reserves, income tax reserves, non-cash share-based compensation and post-retirement obligations. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed in the notes herein.

b)Non-Cash Share-Based Compensation

The company estimates the fair value of market-based stock awards and stock options at the time of grant and recognizes compensation cost over the vesting period of the awards and options. Non-cash share-based compensation expense was $6.2 million and $7.6 million for the three months period ended June 28, 2025 and June 29, 2024, respectively. Non-cash share-based compensation expense was $8.7 million and $21.5 million for the six months period ended June 28, 2025 and June 29, 2024, respectively.

c)Income Taxes

A tax provision of $27.0 million, at an effective rate of 20.3%, was recorded during the three months period ended June 28, 2025, as compared to a $39.4 million tax provision at an effective rate of 25.4% in the prior year period. A tax provision of $56.1 million, at an effective rate of 22.1%, was recorded during the six months period ended June 28, 2025, as compared to a $67.7 million tax provision at an effective rate of 25.1% in the prior year period. During the three months period ended June 28, 2025, the effective tax rate was less than prior period ending due to discrete tax benefits associated with internal restructuring. The effective tax rate for the three months period ended June 28, 2025, when excluding the internal restructuring tax benefit, is higher than the U.S. statutory tax rate of 21.0% primarily due to state taxes and foreign tax rate differentials.

d)Fair Value Measures 

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

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

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

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

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

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

The contingent consideration as of June 28, 2025 and December 28, 2024 relates to the earnout provisions recorded in conjunction with various purchase agreements.

Earnout liabilities are classified within Level 3 in the fair value hierarchy, as the methodology used to estimate fair value includes significant unobservable inputs reflecting management’s own assumptions. The earnout provisions associated with these acquisitions are based upon performance measurements related to sales and earnings, as defined in the respective purchase agreement. On a quarterly basis, the company assesses the projected results for each of the acquisitions in comparison to the earnout targets and adjusts the liability accordingly. Discount rates for valuing contingent consideration are determined based on the company rates and specific acquisition risk considerations. Changes in fair value associated with the earnout provisions are recognized in Selling, general and administrative expenses within the Condensed Consolidated Statements of Comprehensive Income. The earnout liabilities are included in accrued expenses and other non-current liabilities.

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

Cash paid for interest was $45.7 million and $51.1 million for the six months ended June 28, 2025 and June 29, 2024, respectively. Cash payments totaling $50.3 million and $48.1 million were made for income taxes for the six months ended June 28, 2025 and June 29, 2024, respectively.

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

The company’s potentially dilutive securities consist of shares issuable upon vesting of restricted stock grants, computed using the treasury method and amounted to 28,000 and 6,000 for the three months ended June 28, 2025 and June 29, 2024.

The company’s potentially dilutive securities consist of shares issuable upon vesting of restricted stock grants, computed using the treasury method and amounted to 14,000 and 4,000 for the six months ended June 28, 2025 and June 29, 2024.

For the six months ended June 28, 2025 and June 29, 2024, the average market price of the company's common stock exceeded the exercise price of the Convertible Notes (as defined below) resulting in 769,000 and 519,000 diluted common stock equivalents to be included in the diluted net earnings per share, respectively. There have been no material conversions to date. See Note 12, Financing Arrangements for further details on the Convertible Notes.

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

There were no material acquisitions incurred during the six months ended June 28, 2025.

During 2024, the company completed various acquisitions that were not individually material. The following estimated fair values of assets acquired and liabilities assumed are based on the information that was available as of the acquisition date for the 2024 acquisitions and are summarized as follows (in thousands):

The net long-term deferred tax liability amounted to $1.1 million. The net deferred tax liability is related to the difference between the book and tax basis of identifiable intangible assets.

The goodwill and $16.7 million of other intangibles associated with the trade names are subject to the non-amortization provisions of ASC 350. Other intangibles also include $12.1 million allocated to customer relationships, $1.1 million allocated to developed technology, and $2.3 million allocated to backlog, which are being amortized over periods of 5 years to 7 years, 7 years, and 3 months to 9 months, respectively. Goodwill of $48.0 million and other intangibles of $24.0 million are allocated to the Food Processing Equipment Group for segment reporting purposes. Goodwill of $13.2 million and other intangibles of $8.2 million are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. Of these assets, goodwill of $52.8 million and intangibles of $28.0 million are expected to be deductible for tax purposes.

Two purchase agreements include earnout provisions providing for a contingent payment due to the sellers for the achievement of certain targets. Two earnouts are payable to the extent certain sales and EBITDA targets are met with measurement dates ending between 2026 and 2027. The contractual obligation associated with the contingent earnout provisions recognized on the acquisition date amounts to $8.7 million. One purchase agreement includes a deferred payment due to the sellers payable in 2030. The contractual obligation associated with the deferred payment on the acquisition date amounts to $0.1 million.

The company believes that information gathered to date provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but the company is waiting for additional information necessary to finalize those fair values for the acquisitions completed during 2024. Certain intangible assets are preliminarily valued using historical information from the Food Processing Equipment Group and Commercial Foodservice Equipment Group and qualitative assessment of the businesses at acquisition date. Specifically, the company estimated the fair values of the intangible assets based on the percentage of purchase price assigned to similar intangible assets in previous acquisitions. Thus, the provisional measurements of fair values set forth above are subject to change. The company expects to complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date.

Pro Forma Financial Information

 

In accordance with ASC 805 Business Combinations, the following unaudited pro forma results of operations for the six months ended June 28, 2025 and June 29, 2024, assumes the 2024 and 2025 acquisitions described above were completed on December 31, 2023 (first day of fiscal year 2024). The following pro forma results include adjustments to reflect amortization of intangibles associated with the acquisitions and the effects of adjustments made to the carrying value of certain assets (in thousands, except per share data): 

 

The historical consolidated financial information of the company and the acquisitions have been adjusted in the pro forma information to give effect to events that are (1) directly attributable to the transactions, (2) factually supportable and (3) expected to have a continuing impact on the combined results. Pro forma data may not be indicative of the results that would have been obtained had these acquisitions occurred at the beginning of the periods presented, nor is it intended to be a projection of future results. Additionally, the pro forma financial information does not reflect the costs which the company has incurred or may incur to integrate the acquired businesses.

From time to time, the company is subject to proceedings, lawsuits and other claims related to products, suppliers, employees, customers and competitors. The company maintains insurance to partially cover product liability, workers compensation, property and casualty, and general liability matters. The company is required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses.

A determination of the amount of accrual required, if any, for these contingencies is made after assessment of each matter and the related insurance coverage. The required accrual may change in the future due to new developments or changes in approach, such as a change in settlement strategy in dealing with these matters. The company does not believe that any pending litigation will have a material adverse effect on its financial condition, results of operations or cash flows.

In December 2023, the FASB issued Accounting Standard Update ASU No. 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands the disclosures required in an entity’s income tax rate reconciliation table. This ASU requires consistent categories and greater disaggregation of information presented in the effective tax rate reconciliation and requires disclosure of income taxes paid in both domestic and foreign jurisdictions. The guidance is effective for the company for annual periods beginning on January 1, 2025 and is required to be applied prospectively, with retrospective application to prior periods allowed. Early adoption is permitted. The company is currently evaluating the impact of this amendment on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures: Disaggregation of Income Statement Expenses, which requires disclosure of disaggregated information about specific categories underlying certain income statement expense line items in the footnotes to the financial statements for both annual and interim periods. This ASU is effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The company is currently evaluating the impact of the adoption of this standard.

The company disaggregates its net sales by reportable operating segment and geographical location as the company believes it best depicts how the nature, timing and uncertainty of its net sales and cash flows are affected by economic factors. In general, the Commercial Foodservice Equipment and Residential Foodservice Equipment Groups recognize revenue at the point in time control transfers to their customers based on contractual shipping terms. Revenue from equipment sold under the company's long-term contracts within the Food Processing Equipment group is recognized over time as the equipment is manufactured and assembled. The following table summarizes the company's net sales by reportable operating segment and geographical location (in thousands):

Contract assets primarily relate to the company's right to consideration for work completed but not billed at the reporting date and are recorded in prepaid expenses and other in the Condensed Consolidated Balance Sheet. Contract assets are transferred to receivables when the right to consideration becomes unconditional. Accounts receivable are not considered contract assets under the revenue standard as contract assets are conditioned upon the company's future satisfaction of a performance obligation. Accounts receivable, in contracts, are unconditional rights to consideration.

Contract liabilities relate to advance consideration received from customers for which revenue has not been recognized. Current contract liabilities are recorded in accrued expenses in the Condensed Consolidated Balance Sheet. Non-current contract liabilities are recorded in other non-current liabilities in the Condensed Consolidated Balance Sheet. Contract liabilities are reduced when the associated revenue from the contract is recognized.

The following table provides information about contract assets and contract liabilities from contracts with customers (in thousands):

During the six months period ended June 28, 2025, the company reclassified $33.9 million to receivables, which was included in the contract asset balance at the beginning of the period. During the six months period ended June 28, 2025, the company recognized revenue of $71.3 million, which was included in the contract liability balance at the beginning of the period. Additions to contract liabilities representing amounts billed to clients in excess of revenue recognized to date were $95.0 million during the six months period ended June 28, 2025.

Substantially all of the company's outstanding performance obligations will be satisfied within 12 to 36 months. There were no contract asset impairments during the six months period ended June 28, 2025.

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

(1) As of June 28, 2025, pension and unrealized loss on interest rate swap amounts, net of tax, were $14.8 million and $5.2 million, respectively. During the six months ended June 28, 2025, the adjustments to pension and unrealized loss on interest rate swap amounts, net of tax, were $0.9 million and $(2.8) million, respectively. As of June 29, 2024, pension and unrealized gain on interest rate swap amounts, net of tax, were $4.3 million and $10.3 million, respectively. During the six months ended June 29, 2024, the adjustments to pension and unrealized gain on interest rate swap amounts, net of tax, were $0.3 million and $(0.9) million, respectively.

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

Inventories at June 28, 2025 and December 28, 2024 are as follows (in thousands): 

Changes in the carrying amount of goodwill for the six months ended June 28, 2025 are as follows (in thousands):

The company continues to monitor the current domestic and international political environment, including global trade policies and tariff actions to assess the outlook for demand of its products and the impact on its business and financial performance. The potential impact of tariffs on demand, production levels, and its operating results in the short-term is uncertain, but the company remains committed to evaluating opportunities to mitigate potential increased costs and implementing strategic actions necessary to realize long-term revenue and cash flow growth rates. The potential negative demand effect on revenues is also uncertain given the volatile environment, but demand and production levels are anticipated to recover.

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

Intangible assets consist of the following (in thousands):

 

The aggregate intangible amortization expense was $15.4 million and $16.2 million for the three months period ended June 28, 2025 and June 29, 2024, respectively. The aggregate intangible amortization expense was $31.4 million and $33.6 million for the six months period ended June 28, 2025 and June 29, 2024, respectively. The estimated future amortization expense of intangible assets is as follows (in thousands):

 

Twelve Month Period coinciding with the end of the company's Fiscal Second Quarter			Amortization Expense
2026			$	58,976
2027			52,355
2028			44,637
2029			39,003
2030			34,240
Thereafter			63,388
			$	292,599

Accrued expenses consist of the following (in thousands):

In the normal course of business, the company issues product warranties for specific product lines and provides for the estimated future warranty cost in the period in which the sale is recorded. The estimate of warranty cost is based on contract terms and historical warranty loss experience that is periodically adjusted for recent actual experience. Because warranty estimates are forecasts that are based on the best available information, actual claims costs may differ from amounts provided. Adjustments to initial obligations for warranties are made as changes in the obligations become reasonably estimable.

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

As of June 28, 2025, the company had $1.6 billion of borrowings outstanding under its credit facility (the "Credit Facility"), including $918.7 million outstanding under the term loan ($916.7 million, net of unamortized issuance fees) and $703.1 million outstanding under the delayed draw term loan. The company also had $5.6 million in outstanding letters of credit as of June 28, 2025, which reduces the borrowing availability under the Credit Facility. Remaining borrowing capacity under this facility was $2.7 billion at June 28, 2025.

On August 11, 2022, the company borrowed $750.0 million against the delayed draw term facility as provided under the Credit Agreement. The funds were used to reduce outstanding borrowings under the revolver. The delayed draw term loan amortizes in quarterly installments due on the last day of each fiscal quarter, and commenced on December 31, 2022, in an amount equal to 0.625% of the principal drawn, with the balance, plus any accrued interest payable by October 21, 2026.

At June 28, 2025, borrowings under the Credit Facility accrued interest at a rate of 1.375% above the daily simple or term Secured Overnight Financing Rate (“SOFR”) per annum or 0.375% above the highest of the prime rate, the federal funds rate plus 0.50% and one month Term SOFR plus 1.00%. The interest rates on borrowings under the Credit Facility may be adjusted quarterly based on the company’s Funded Debt less Unrestricted Cash to Pro Forma EBITDA (the “Leverage Ratio”) on a rolling four-quarter basis. Additionally, a commitment fee based upon the Leverage Ratio is charged on the unused portion of the commitments under the Credit Facility. As of June 28, 2025, borrowings under the Credit Facility accrued interest at a minimum of 1.375% above SOFR (with an additional spread adjustment of 0.10%) and the variable unused commitment fee will be at a minimum of 0.20%. The average interest rate per annum, inclusive of hedging instruments, on the debt under the Credit Facility was equal to 4.69% at the end of the period and the variable commitment fee was equal to 0.20% per annum as of June 28, 2025.

In addition, the company has international credit facilities to fund working capital needs outside the United States. At June 28, 2025, these foreign credit facilities amounted to $8.7 million in U.S. Dollars with a weighted average per annum interest rate of approximately 2.50%.

The company’s debt is reflected on the balance sheet at cost. The fair values of the Credit Facility, term debt and foreign and other debt is based on the amount of future cash flows associated with each instrument discounted using the company's incremental borrowing rate. The company believes its interest rate margins, based on the company’s Leverage Ratio, on its existing debt are consistent with current market conditions and therefore the carrying value of debt reflects the fair value. The carrying value and estimated aggregate fair value, a level 2 measurement, based primarily on market prices, of debt excluding the Convertible Notes is as follows (in thousands):

The company uses floating-to-fixed interest rate swap agreements to hedge variable interest rate risk associated with the Credit Facility. At June 28, 2025, the company had outstanding floating-to-fixed interest rate swaps totaling $355.0 million notional amount carrying an average interest rate of 1.96% maturing in less than 12 months and $315.0 million notional amount carrying an average interest rate of 1.28% that mature in more than 12 months but less than 32 months.

At June 28, 2025, the company was in compliance with all covenants pursuant to its borrowing agreements.

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

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

The estimated fair value of the Convertible Notes was $829.7 million as of June 28, 2025 and was determined through consideration of quoted market prices. The fair value is classified as Level 2, as defined in Note 1(d), Fair Value Measurements, in these Notes to the Condensed Consolidated Financial Statement. The if-converted value of the Convertible Notes exceeded their respective principal value by $94.8 million as of June 28, 2025.

In connection with the pricing of the Convertible Notes, the company entered into privately negotiated Capped Call Transactions (the "2020 Capped Call Transactions") and the company used the net proceeds of the offering of the Convertible Notes to pay the aggregate amount of $104.7 million for them. The company entered into two tranches of privately negotiated Capped Call Transactions in December 2021 (the "2021 Capped Call Transactions") in the aggregate amount of $54.6 million. On March 15, 2022, the company entered into an additional tranche of privately negotiated Capped Call Transactions (the "2022 Capped Call Transactions") in the amount of $9.7 million.

The 2020, 2021, and 2022 Capped Call Transactions (collectively, the "Capped Call Transactions") are expected generally to reduce the potential dilution and/or offset the cash payments the company is required to make in excess of the principal amount of the Convertible Notes upon conversion of the Convertible Notes in the event that the market price per share of the company's common stock is greater than the strike price of the Capped Call Transactions (which initially corresponds to the initial conversion price of the Convertible Notes and is subject to certain adjustments under the terms of the Capped Call Transactions), with such reduction and/or offset subject to a cap based on the cap price of the Capped Call Transactions. The 2020 Capped Call Transactions have an initial cap price of $207.93 per share of the company's common stock. The 2021 Capped Call Transactions have initial cap prices of $216.50 and $225.00 per share of the company's common stock. The 2022 Capped Call Transactions have an initial cap price of $229.00 per share. The Capped Call Transactions cover, initially, the number of shares of the company's common stock underlying the Convertible Notes, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes.

The Capped Call Transactions are separate transactions entered into by the company with the capped call counterparties, and are not part of the terms of the Convertible Notes and will not affect any holder's right under the Convertible Notes. Holders of the Convertible Notes will not have any rights with respect to the Capped Call Transactions. The Capped Call Transactions do not meet the criteria for separate accounting as a derivative as they are indexed to the company's stock. The premiums paid of the Capped Call Transactions have been included as a net reduction to additional paid-in capital with stockholders' equity.

Foreign Exchange: The company uses foreign currency forward, foreign exchange swaps and option purchase and sales contracts to hedge its exposure to changes in foreign currency exchange rates. The company’s primary hedging activities are to mitigate its exposure to changes in exchange rates on intercompany and third-party trade receivables and payables. The company does not currently enter into derivative financial instruments for speculative purposes. In managing its foreign currency exposures, the company identifies and aggregates naturally occurring offsetting positions and then hedges residual balance sheet exposures. The notional amount of foreign currency contracts outstanding was $137.0 million and $239.3 million as of June 28, 2025 and December 28, 2024, respectively. The fair value of the forward and option contracts was a loss of $0.7 million at the end of the second quarter of 2025.

Interest Rate: The company has entered into interest rate swaps to fix the interest rate applicable to certain of its variable-rate debt. The agreements swapped one-month LIBOR for fixed rates. In February 2022, the company entered into an additional floating-to-fixed interest rate swap agreement that uses a daily SOFR in lieu of LIBOR. In April 2023, all outstanding LIBOR swap agreements were amended to one month term SOFR. The company has designated these swaps as cash flow hedges and all changes in fair value of the swaps are recognized in accumulated other comprehensive income. As of June 28, 2025, the fair value of these instruments was an asset of $18.0 million. The change in fair value of these swap agreements in the first six months of 2025 was a loss of $9.2 million, net of taxes.

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

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

									Three Months Ended												Six Months Ended
			Presentation of Gain/(loss)						Jun 28, 2025						Jun 29, 2024						Jun 28, 2025						Jun 29, 2024
Gain/(loss) recognized in accumulated other comprehensive income			Other comprehensive income						$	(220)					$	3,721					$	(2,709)					$	14,568
Gain reclassified from accumulated other comprehensive income (effective portion)			Interest expense						$	4,599					$	6,859					$	9,260					$	14,425

Interest rate swaps are subject to default risk to the extent the counterparties are unable to satisfy their settlement obligations under the interest rate swap agreements. As a result, the company has counterparty credit exposure to large global financial institutions, which the company monitors on a regular basis.

An operating segment is defined as a component of an enterprise, which has discrete financial information that is evaluated regularly. The company determined that its Chief Executive Officer is the Chief Operating Decision Maker (the "CODM"), who possesses the ultimate authority with respect to assessment of performance, allocation of resources, and all strategic actions of the company. In performing this responsibility, the CODM regularly reviews key internal management reports, financial information including forecasts, and quarterly results, which are prepared at the operating segment level.

In accordance with ASC 280-10, Segment Reporting, the company operates in three reportable operating segments defined by management reporting structure and operating activities. The company’s reportable segments are: (i) the Commercial Foodservice Equipment Group, (ii) the Food Processing Equipment Group, and (iii) the Residential Kitchen Equipment Group.

Adjusted EBITDA is the profitability metric reported to the CODM for the purposes of making decisions about allocation of resources to each segment and assessing performance of each segment. The company defines Adjusted EBITDA as operating income less depreciation, intangible amortization, restructuring, acquisition related adjustments, impairments, stock compensation and other non-recurring items, which management considers to be outside core operating results. The CODM reviews this metric regularly to compare the profitability of segments, identify trends, and evaluate which segments require additional resources or strategic adjustments. The CODM uses Adjusted EBITDA to support the allocation of resources predominantly in the annual budget and forecasting process. The company believes that investors find this measure useful in comparing our operating performance to that of other companies in our industry because this measure generally illustrates the underlying performance of the business.

Management believes that inter-segment sales are made at established arm's length transfer prices. All inter-segment transactions are eliminated and values are presented net of eliminations. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

Additional detail about each of the reportable segments and its corporate income and expenses is set forth below:

The Commercial Foodservice Equipment Group manufactures, sells, and distributes foodservice equipment for the restaurant and institutional kitchen industry. The Food Processing Equipment Group manufactures preparation, cooking, packaging food handling and food safety equipment for the food processing industry. The Residential Kitchen Equipment Group manufactures, sells and distributes kitchen equipment for the residential market.

The following table summarizes the results of operations for the company's business segments(1) (dollars in thousands):