What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-03-02 compared with 2021-03-03 · 303 added, 358 removed, 1046 unchanged (39% of the section changed)

Financial Statements and Supplementary Data

Reports of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets

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In our opinion, The Middleby Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of January 1, 2022, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of RAM, Deutsche, Wild Goose and United Foodservice Equipment Zhuhai, which are included in the 2020 consolidated financial statements of the Company and constituted 2.7% and 0.0% of total and net assets, respectively, as of January 2, 2021 and 0.6% and (3.1%) of revenues and net income, respectively, for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of RAM, Deutsche, Wild Goose and United Foodservice Equipment Zhuhai.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of January 2, 2021 and December 28, 2019, the related consolidated statements of earnings, comprehensive income, changes in stockholders' equity and cash flows for each of the three years in the period ended January 2, 2021, and the related notes and financial statement schedule listed in the Index at Item 8 and our report dated March 3, 2021 expressed an unqualified opinion thereon.

As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Novy, Imperial, Newton CFV, Kamado Joe and Masterbuilt and Char-Griller, which are included in the 2021 consolidated financial statements of the Company and constituted 17.6% and 1.0% of total and net assets, respectively, as of January 1, 2022 and 1.9% and (0.4%) of net sales and net earnings, respectively, for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Novy, Imperial, Newton CFV, Kamado Joe and Masterbuilt and Char-Griller.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of January 1, 2022 and January 2, 2021, the related consolidated statements of earnings, comprehensive income, changes in stockholders' equity and cash flows for each of the three years in the period ended January 1, 2022, and the related notes and financial statement schedule listed in the Index at Item 8 and our report dated March 2, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Controls over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of The Middleby Corporation (the Company) as of January 2, 2021 and December 28, 2019, the related consolidated statements of earnings, comprehensive income, changes in stockholders' equity and cash flows for each of the three years in the period ended January 2, 2021, and the related notes and financial statement schedule listed in the Index at Item 8, (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 2, 2021 and December 28, 2019, and the results of its operations and its cash flows for each of the three years in the period ended January 2, 2021, in conformity with U.S.

We have audited the accompanying consolidated balance sheets of The Middleby Corporation (the Company) as of January 1, 2022 and January 2, 2021, the related consolidated statements of earnings, comprehensive income, changes in stockholders' equity and cash flows for each of the three years in the period ended January 1, 2022, and the related notes and financial statement schedule listed in the Index at Item 8 (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 1, 2022 and January 2, 2021, and the results of its operations and its cash flows for each of the three years in the period ended January 1, 2022, in conformity with U.S.

generally accepted accounting principles.

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(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the account or disclosure to which it relates.

Impairment tests of indefinite-lived intangible assets

Description of the Matter At January 2, 2021, the Company's indefinite-lived intangible assets consist of trademarks and tradenames with an aggregate carrying value of approximately $1,026 million and represented 19.7% of total assets.

As described in Note 3 of the consolidated financial statements, trademarks and tradenames with indefinite lives are tested by the Company’s management for impairment at least annually, in the fiscal fourth quarter, unless there are indications of impairment at other points throughout the year.

If the fair value of the intangible asset is less than its carrying amount, an impairment loss is recognized in an amount equal to the difference.

Auditing the impairment tests of indefinite–lived intangible assets is complex due to the significant management judgments and estimates required to determine the fair value of the trademarks and tradenames, including assumptions as to forecasted net sales, discount rates and royalty rates, all of which are sensitive to and affected by economic, industry and company-specific qualitative factors.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company's controls over the impairment tests of indefinite-lived intangible assets.

This included evaluating controls over the Company’s process used to develop the forecasts of future net sales and the selection of royalty rates and discount rates used in estimating the fair value of the trademarks and tradenames with indefinite lives.

We also tested controls over management’s review of the completeness and accuracy of data used in their valuation models.

To test the estimated fair value of the Company’s trademarks and tradenames, we performed audit procedures that included, among others, assessing the methodologies, testing the significant assumptions discussed above and testing the completeness and accuracy of the underlying data.

We compared the significant assumptions used by management to current industry and economic trends, the Company’s historical results and other guideline companies within the same industry and evaluated whether changes in the Company’s business would affect the significant assumptions.

We assessed the historical accuracy of management’s estimates by comparing them to actual operating results and performed sensitivity analyses of significant assumptions to evaluate the change in the fair value of the trademarks and tradenames with indefinite lives resulting from changes in these assumptions.

We involved our specialist to assist in reviewing the valuation methodology and testing the discount rates and royalty rates.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Business Combinations

Description of the Matter As described in Note 2 to the consolidated financial statements, the Company completed the acquisitions of Novy Invest NV and Kamado Joe and Masterbuilt for total net purchase consideration of $651.6 million in the year ended January 1, 2022.

The acquisitions were accounted for under the acquisition method of accounting and the assets acquired and liabilities assumed have been recorded based on preliminary estimates of fair value which are subject to change based on the finalization of the fair values of the assets acquired and liabilities assumed.

Auditing the Company’s accounting for the preliminary allocation of the purchase price for these acquisitions was complex due to the overall significance of the acquisitions and the estimation uncertainty in determining the fair value of identifiable intangible assets, which principally consisted of customer relationships and tradenames.

The estimation uncertainty was primarily due to the sensitivity of the respective fair values to underlying assumptions.

A significant assumption used by the Company to estimate the preliminary fair value of these assets was the determination of which of the Company’s historical acquisitions were of a comparable nature to be utilized as a basis for estimating the fair value of identified intangible assets.

This determination was based upon an analysis by the Company of each acquiree’s overall business and customer base as compared to the Company’s historical acquisitions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls that address the risks of material misstatement relating to the estimation of the preliminary fair value of the identifiable intangible assets.

For example, we tested controls over management’s review of the significant assumptions, such as their evaluation of each acquired business compared with historical acquisitions executed by the Company to determine similarities and differences which provided the basis for determining which of the historical transactions to use in estimating fair values of the identifiable intangible assets.

To test the estimate of the preliminary fair value of the acquired identifiable intangible assets, our audit procedures included, among others, assessing the appropriateness of the historical acquisitions utilized as a basis in estimating the preliminary fair values and testing the underlying data used by the Company.

For example, we obtained an understanding of the nature of each acquired business through audit procedures such as review of publicly available information, inquiries of management, and review of historical financial information.

Based on this understanding, we compared the nature of each acquired business and operations to the historical acquisitions of the Company used in the preliminary fair value estimates.

We also tested the mathematical accuracy of historical acquisition averages for identifiable intangible assets.

/s/ Ernst & Young LLP

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CONSOLIDATED BALANCE SHEETS

JANUARY 2, 2021 AND DECEMBER 28, 2019

JANUARY 1, 2022 AND JANUARY 2, 2021

(amounts in thousands, except share data)

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CONSOLIDATED STATEMENTS OF EARNINGS

FOR THE FISCAL YEARS ENDED JANUARY 2, 2021, DECEMBER 28, 2019

FOR THE FISCAL YEARS ENDED JANUARY 1, 2022, JANUARY 2, 2021

AND DECEMBER 28, 2019

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Restructuring expenses 7,655 12,375 10,480

Merger termination fee ( 110,000 ) — —

Gain on litigation settlement — — ( 14,839 )

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Curtailment loss — 14,682 865

Other expense (income), net 3,071 ( 2,328 ) 1,825

Other (income) expense, net ( 1,603 ) 3,071 ( 2,328 )

Earnings before income taxes 619,504 268,057 462,619

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE FISCAL YEARS ENDED JANUARY 2, 2021, DECEMBER 28, 2019

FOR THE FISCAL YEARS ENDED JANUARY 1, 2022, JANUARY 2, 2021

AND DECEMBER 28, 2019

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Net earnings $ 488,492 $ 207,294 $ 352,240

Other comprehensive (loss) income:

Other comprehensive income (loss):

Foreign currency translation adjustments ( 47,693 ) 55,744 7,066

Pension liability adjustment, net of tax 151,223 ( 172,583 ) ( 57,398 )

Unrealized (loss) gain on interest rate swaps, net of tax ( 20,656 ) ( 24,125 ) 868

Other comprehensive (loss) income:

Unrealized gain (loss) on interest rate swaps, net of tax 24,484 ( 20,656 ) ( 24,125 )

Unrealized gain on certain investments, net of tax $ 1,330 $ — $ —

Other comprehensive income (loss):

$ 129,344 $ ( 137,495 ) $ ( 74,457 )

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE FISCAL YEARS ENDED JANUARY 2, 2021, DECEMBER 28, 2019

FOR THE FISCAL YEARS ENDED JANUARY 1, 2022, JANUARY 2, 2021

AND DECEMBER 28, 2019

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— — — ( 11 ) 11 —

Adoption of ASU 2014-09 (2)

— — — ( 4,405 ) — ( 4,405 )

Currency translation adjustments — — — — 7,066 7,066

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— — — — ( 57,398 ) ( 57,398 )

Unrealized gain on interest rate swap, net of tax of $( 81 )

Unrealized loss on interest rate swap, net of tax of $( 8,516 )

— — — — ( 24,136 ) ( 24,136 )

Stock compensation — 8,133 — — — 8,133

Stock issuance — 1,850 — — — 1,850

Purchase of treasury stock — — ( 6,144 ) — — ( 6,144 )

Balance, December 28, 2019 $ 145 $ 387,402 $ ( 451,262 ) $ 2,361,462 $ ( 350,933 ) $ 1,946,814

Net earnings — — — 207,294 — 207,294

Adoption of ASU 2017-12 (3)

— — — ( 11 ) 11 —

Currency translation adjustments — — — — 55,744 55,744

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Purchase of treasury stock — — ( 85,872 ) — — ( 85,872 )

Balance, December 28, 2019 $ 145 $ 387,402 $ ( 451,262 ) $ 2,361,462 $ ( 350,933 ) $ 1,946,814

Equity component of issuance of convertible notes — 308 — — — 308

Balance, January 2, 2021 $ 147 $ 433,308 $ ( 537,134 ) $ 2,568,756 $ ( 488,428 ) $ 1,976,649

Net earnings — — — 488,492 — 488,492

Adoption of ASU 2020-06 (2)

— ( 79,430 ) — 5,055 — ( 74,375 )

Currency translation adjustments — — — — ( 47,693 ) ( 47,693 )

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— — — — 151,223 151,223

Unrealized loss on interest rate swap, net of tax of $( 7,147 )

Unrealized gain on interest rate swap, net of tax of $ 8,619

— — — — 24,484 24,484

Unrealized gain on certain investments, net of tax of $ 443

— — — — 1,330 1,330

Stock compensation — 42,330 — — — 42,330

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Purchase of treasury stock — — ( 29,265 ) — — ( 29,265 )

Equity component of issuance of convertible notes — 308 — — — 308

Purchase of capped calls, net of tax of $( 13,132 )

— ( 41,421 ) — — — ( 41,421 )

Balance, January 1, 2022 $ 147 $ 357,309 $ ( 566,399 ) $ 3,062,303 $ ( 359,084 ) $ 2,494,276

(1) As of December 30, 2018, the company adopted ASU No.

2018-02, Income Statement-Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income .

The adoption of this guidance resulted in the reclassification of $ 1.1 million, including $ 1.6 million related to interest rate swap and $( 0.5 ) million related to pensions, of stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 from accumulated other comprehensive income to retained earnings.

(2) As of December 31, 2017, the company adopted ASU No.

2014-09, Revenue from Contracts with Customers (ASC 606) using the modified retrospective method to contracts that were not completed as of December 30, 2017.

The adoption of this guidance resulted in the recognition of $( 4.4 ) million as an adjustment to the opening balance of retained earnings.

(3) As of December 30, 2018, the company adopted ASU No.

2017-12, "Derivatives and Hedging (Topic 815):

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The adoption of this guidance resulted in the recognition of less than $( 0.1 ) million as an adjustment to the opening balance of retained earnings.

(2) As of January 3, 2021 the company adopted ASU No.

2020-06, A ccounting for Convertible Instruments and Contracts in an Entity’s Own Equity using the modified retrospective method.

The adoption of this guidance resulted in a $ 79.4 million reduction to paid-in capital, net of tax of $ 25.5 million, and the recognition of $ 5.1 million as an adjustment to the opening balance of retained earnings, net of tax of $ 1.6 million.

The accompanying Notes to Consolidated Financial Statements

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CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE FISCAL YEARS ENDED JANUARY 2, 2021, DECEMBER 28, 2019

FOR THE FISCAL YEARS ENDED JANUARY 1, 2022, JANUARY 2, 2021

AND DECEMBER 28, 2019

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Net additions to property, plant and equipment ( 46,551 ) ( 34,849 ) ( 46,609 )

Proceeds on sale of property, plant and equipment 14,147 — —

Proceeds from sale of property, plant and equipment 6,290 14,147 —

Purchase of intangible assets ( 5,000 ) ( 7,052 ) —

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Debt issuance costs ( 9,242 ) ( 10,974 ) —

Net cash (used in) provided by financing activities ( 252,468 ) ( 25,445 ) 856,129

Net cash provided by (used in) financing activities 502,789 ( 252,468 ) ( 25,445 )

Effect of exchange rates on cash and cash equivalents ( 5,068 ) 8,043 ( 1,514 )

Changes in cash and cash equivalents—

Net increase (decrease) in cash and cash equivalents 173,603 22,799 ( 17,953 )

Net (decrease) increase in cash and cash equivalents ( 87,741 ) 173,603 22,799

Cash and cash equivalents at beginning of year 268,103 94,500 71,701

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JANUARY 2, 2021, DECEMBER 28, 2019

FOR THE FISCAL YEARS ENDED JANUARY 1, 2022, JANUARY 2, 2021

AND DECEMBER 28, 2019

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The Middleby Corporation (the "company") is engaged in the design, manufacture and sale of commercial foodservice, food processing equipment and residential kitchen equipment.

The company manufactures and assembles this equipment at forty U.S.

and twenty-nine international manufacturing facilities.

The company manufactures and assembles this equipment at thirty-nine U.S.

and twenty-eight international manufacturing facilities.

The company operates in three business segments:

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The products offered by this group include a wide array of cooking and baking solutions, including batch ovens, baking ovens, proofing ovens, conveyor belt ovens, continuous processing ovens, frying systems and automated thermal processing systems.

The company also provides a comprehensive portfolio of complementary food preparation equipment such as 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, food safety, food handling, freezing, defrosting and packaging equipment.

This portfolio of equipment can be integrated to provide customers a highly efficient and customized solution.

The Residential Kitchen Equipment Group has a broad portfolio of innovative and professional-style residential kitchen equipment.

The products offered by this group include ranges, cookers, stoves, cooktops, microwaves, ovens, refrigerators, dishwashers, undercounter refrigeration, wine cellars, ice machines, ventilation equipment and outdoor equipment.

(2) ACQUISITIONS AND PURCHASE ACCOUNTING

The following represents the company's significant acquisitions in 2020 and 2019 as well as summarized information on various acquisitions that were not individually material.

The company also made smaller acquisitions not presented below which are individually and collectively immaterial.

Cooking Solutions Group

On April 1, 2019, the company completed its acquisition of all of the capital stock of Cooking Solutions Group, Inc.

("Cooking Solutions Group") from Standex International Corporation, which consists of the brands APW Wyott, Bakers Pride, BKI and Ultrafryer with locations in Texas, South Carolina and Mexico for a purchase price of approximately $ 106.1 million, net of cash acquired.

During the third quarter of 2019, the company finalized the working capital and purchase price allocation provided for by the purchase agreement resulting in a payment due to the sellers of $ 0.1 million.

The final allocation of consideration paid for the Cooking Solutions Group acquisition is summarized as follows (in thousands) :

The following represents the company's significant acquisitions in 2021 and 2020, the termination of a Merger Agreement, as well as summarized information on various acquisitions that were not individually material.

Termination of Welbilt Merger

On April 20, 2021, Middleby entered into a Merger Agreement with Welbilt, Inc.

Following Welbilt's receipt of an alternative acquisition proposal, on July 13, 2021, Middleby announced that, under the terms of the Merger Agreement, it would not exercise its right to propose any modifications to the terms of the Merger Agreement and would allow the match period to expire.

Accordingly, on July 14, 2021, Welbilt delivered to Middleby a written notice terminating the Merger Agreement and, concurrently with Middleby’s receipt of the termination fee of $ 110.0 million in cash from Welbilt, the Merger Agreement was terminated on July 14, 2021.

The termination fee received is reflected in the Consolidated Statements of Comprehensive Earnings as the "merger termination fee" and $ 19.7 million of deal costs associated with the transaction are reflected in selling, general and administrative expenses in the Consolidated Statements of Comprehensive Earnings.

2020 Acquisitions

During 2020, the company completed various acquisitions that were not individually material.

The final allocation of consideration paid for the other 2020 acquisitions is summarized as follows (in thousands):

Preliminary Opening Balance Sheet Measurement

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Current liabilities ( 54,478 ) 13,037 ( 41,441 )

Long-term deferred tax liability ( 13,082 ) 2,553 ( 10,529 )

Long-term deferred tax (liability) asset ( 123 ) 387 264

Other non-current liabilities ( 21,902 ) 791 ( 21,111 )

Consideration paid at closing $ 109,485 $ 5,000 $ 114,485

Deferred payments 8,666 ( 468 ) 8,198

Contingent consideration 16,144 ( 836 ) 15,308

Net assets acquired and liabilities assumed $ 134,295 $ 3,696 $ 137,991

The long term deferred tax liability amounted to $ 10.5 million.

The net deferred tax liability is comprised of $ 11.6 million of deferred tax liability related to the difference between the book and tax basis on identifiable intangible asset and liability accounts and $ 1.1 million of deferred tax asset related to the difference between the book and tax basis on identifiable tangible assets and liability accounts.

The goodwill and $ 24.7 million of other intangibles associated with the trade name is subject to the non-amortization provisions of ASC 350.

Other intangibles also include $ 22.5 million allocated to customer relationships and $ 0.4 million allocated to backlog, which are being amortized over periods of 9 years and 3 months, respectively.

Goodwill and other intangibles of Cooking Solutions Group are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes.

These assets are not expected to be deductible for tax purposes.

Other 2019 Acquisitions

During 2019 the company completed various other acquisitions that were not individually material.

The final allocation of consideration paid for the other 2019 acquisitions is summarized as follows (in thousands):

Preliminary Opening Balance Sheet Measurement

The long-term deferred tax asset amounted to $ 0.3 million and is related to the difference between the book and tax basis on other assets and liability accounts.

The goodwill and $ 15.7 million of other intangibles associated with the trade names are subject to the non-amortization provisions of ASC 350.

Other intangibles also include $ 10.6 million allocated to customer relationships, $ 31.2 million allocated to developed technology and $ 6.3 million allocated to backlog, which are being amortized over periods of 6 to 9 years, 6 to 12 years, and 3 to 9 months, respectively.

Goodwill of $ 59.2 million and other intangibles of $ 63.8 million from these acquisitions are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes.

Of these assets, goodwill of $ 24.4 million and intangibles of $ 63.5 million are expected to be deductible for tax purposes.

Several purchase agreements include deferred payment and earnout provisions providing for contingent payments due to the sellers to the extent certain financial targets are exceeded.

The deferred payments are payable between 2021 and 2022.

The contractual obligations associated with the deferred payments on the acquisition dates amount to $ 8.2 million.

The earnouts are payable between 2021 and 2023, if the company exceeds certain sales and earnings targets.

The contractual obligations associated with the contingent earnout provisions recognized on the acquisition dates amount to $ 15.3 million.

Novy Invest NV

On July 12, 2021, the company completed its acquisition of all of the capital stock of Novy Invest NV ("Novy"), a leading manufacturer of premium residential ventilation hoods and cook tops located in Belgium, for a purchase price of approximately $ 250.9 million, net of cash acquired.

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

Preliminary Opening Balance Sheet Preliminary Measurement

Adjustments Adjusted Opening Balance Sheet

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Other intangibles 126,557 22,966 149,523

Long-term deferred tax asset 1,288 1,428 2,716

Other assets 26 173 199

Current liabilities ( 23,440 ) 569 ( 22,871 )

Long-term deferred tax liability ( 33,918 ) ( 5,519 ) ( 39,437 )

Other non-current liabilities ( 1,930 ) ( 111 ) ( 2,041 )

Consideration paid at closing $ 171,803 $ ( 1,205 ) $ 170,598

Deferred payments 2,404 — 2,404

Contingent consideration 4,258 3,600 7,858

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

The long-term deferred tax asset amounted to $ 2.7 million.

The net deferred tax asset is comprised of $ 2.9 million of deferred tax asset related to tax loss carryforwards, $ 1.0 million of deferred tax liability related to the difference between the book and tax basis of identifiable intangible assets and $ 0.8 million of deferred tax asset related to the difference between the book and tax basis on identifiable tangible asset and liability accounts.

The long-term deferred tax liability amounted to $ 39.4 million.

The deferred tax liability is comprised of $ 37.4 million related to the difference between the book and tax basis of identifiable intangible assets and $ 2.0 million related to the difference between the book and tax basis on identifiable tangible asset and liability accounts.

The goodwill and $ 105.7 million of other intangibles associated with the trade names are subject to the non-amortization provisions of ASC 350.

Other intangibles also include $ 27.9 million allocated to customer relationships, $ 12.3 million allocated to developed technology and $ 1.4 million allocated to backlog, which are being amortized over periods of 5 to 10 years, 5 to 12 years, and 3 months, respectively.

Goodwill of $ 42.5 million and other intangibles of $ 35.5 million of the companies are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes.

Goodwill of $ 34.9 million and other intangibles of $ 30.1 million are allocated to the Food Processing Equipment Group for segment reporting purposes.

Goodwill of $ 11.3 million and other intangibles of $ 9.8 million are allocated to the Residential Kitchen Equipment Group for segment reporting purposes.

Other intangibles also include $ 40.0 million allocated to customer relationships, $ 2.7 million allocated to developed technology and $ 1.1 million allocated to backlog, which are being amortized over periods of 7 years, 7 years, and 3 months, respectively.

Goodwill of $ 125.6 million and other intangibles of $ 149.5 million from this acquisition are allocated to the Residential Kitchen Equipment Group for segment reporting purposes.

Goodwill and other intangibles are not expected to be deductible for tax purposes.

The company believes that information gathered to date provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but the company is waiting for additional information necessary to finalize those fair values for all acquisitions completed during 2021.

The intangible assets are pending external valuation and are preliminarily valued using historical information from the Residential Kitchen Equipment Group and qualitative assessment of the business at acquisition date.

Specifically, the company estimated the fair values of the intangible assets based on the percentage of purchase price assigned to similar intangible assets in previous acquisitions.

Thus, the provisional measurements of fair values set forth above are subject to change.

The company expects to complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date.

Kamado Joe and Masterbuilt

On December 27, 2021, the company completed its acquisition of all of the member interests of Masterbuilt Holdings, LLC ("Kamado Joe and Masterbuilt") and their residential outdoor brands of Kamado Joe and Masterbuilt, a leader in outdoor residential cooking located in the Atlanta, Georgia area, for a purchase price of approximately $ 400.7 million, net of cash acquired.

The purchase price included $ 403.6 million in cash and 12,921 shares of Middleby common stock valued at $ 2.5 million.

The purchase price is subject to adjustment based upon a working capital provision provided by the purchase agreement.

The company expects to finalize this in the second quarter of 2022.

Preliminary Opening Balance Sheet

Current assets 137,826

Property, plant and equipment 7,773

Goodwill 110,052

Other intangibles 215,577

Other assets 2,143

Current liabilities ( 54,865 )

Long-term deferred tax liability ( 15,907 )

Other non-current liabilities ( 1,914 )

Net assets acquired and liabilities assumed $ 406,066

The long-term deferred tax liability amounted to $ 15.9 million.

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

The goodwill and $ 158.8 million of other intangibles associated with the trade names are subject to the non-amortization provisions of ASC 350.

Other intangibles also include $ 50.3 million allocated to customer relationships and $ 6.5 million allocated to backlog, which are being amortized over periods of 7 years and 3 months, respectively.

Goodwill of $ 110.1 million and other intangibles of $ 215.6 million of the company are allocated to the Residential Kitchen Equipment Group for segment reporting purposes.

Of these assets, goodwill of $ 71.7 million and intangibles of $ 164.3 million are expected to be deductible for tax purposes.

Two purchase agreements include deferred payments and earnout provisions providing for contingent payments due to the sellers to the extent certain financial targets are exceeded.

The deferred payments are payable between 2020 and 2022.

The contractual obligations associated with the deferred payments on the acquisition dates amount to $ 2.4 million.

The earnouts are payable between 2021 and 2030, if the companies exceed certain sales and earnings targets.

The contractual obligations associated with the contingent earnout provisions recognized on the acquisition dates amount to $ 7.9 million.

2020 Acquisitions

For the year ended January 2, 2021, the company has completed various acquisitions that were not individually material.

The following estimated fair values of assets acquired and liabilities assumed are based on the information that was available as of the acquisition dates for the acquisitions and are summarized as follows (in thousands):

Specifically, the company estimated the fair values of the intangible assets based on the percentage of purchase price assigned to similar intangible assets in previous acquisitions.

Thus, the provisional measurements of fair values set forth above are subject to change.

The company expects to complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date.

Other 2021 Acquisitions

During the year ended January 1, 2022, the company completed various acquisitions that were not individually material.

The following estimated fair values of assets acquired and liabilities assumed are based on the information that was available as of the acquisition dates for the other 2021 acquisitions and are summarized as follows (in thousands):

Preliminary Opening Balance Sheet Preliminary Measurement

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Consideration paid at closing $ 304,136 $ — $ 304,136

Deferred payments 8,666 — 8,666

Contingent consideration 9,404 — 9,404

Net assets acquired and liabilities assumed $ 313,540 $ — $ 313,540

The long-term deferred tax liability amounted to $ 0.1 million and is related to the difference between the book and tax basis on other assets and liability accounts.

The long-term deferred tax liability amounted to $ 3.0 million.

The net deferred tax liability is comprised of $ 0.6 million of deferred tax asset related to tax loss carryforwards and $ 3.6 million of deferred tax liability related to the difference between the book and tax basis on identifiable tangible asset and liability accounts.

The goodwill and $ 97.1 million of other intangibles associated with the trade names are subject to the non-amortization provisions of ASC 350.

Other intangibles also include $ 14.0 million allocated to customer relationships, $ 20.7 million allocated to developed technology and $ 5.4 million allocated to backlog, which are being amortized over periods of 7 years, 7 to 12 years, and 3 to 9 months, respectively.

Goodwill of $ 56.8 million and other intangibles of $ 63.2 million of the companies are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes.

Of these assets, goodwill of $ 20.0 million and all other intangibles are expected to be deductible for tax purposes.

Several purchase agreements include deferred payment and earnout provisions providing for contingent payments due to the sellers to the extent certain financial targets are exceeded.

The deferred payments are payable between 2020 and 2022.

The contractual obligations associated with the deferred payments on the acquisition date amount to $ 8.7 million.

The earnouts are payable between 2021 and 2023, if the company exceeds certain sales and earnings targets.

The contractual obligations associated with the contingent earnout provisions recognized on the acquisition date amount to $ 16.1 million.

Thus, the provisional measurements of fair value set forth above are subject to change.

Other intangibles also include $ 41.1 million allocated to customer relationships, $ 3.4 million allocated to developed technology, and $ 7.9 million allocated to backlog, which are being amortized over periods of 7 years, 7 years, and 3 months, respectively.

Goodwill of $ 30.5 million and other intangibles of $ 89.0 million are allocated to the Residential Kitchen Equipment Group for segment reporting purposes.

Goodwill of $ 63.8 million and other intangibles of $ 60.5 million are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes.

Of these assets, goodwill of $ 92.3 million and intangibles of $ 148.4 million are expected to be deductible for tax purposes.

One purchase agreement includes earnout provisions providing for contingent payments due to the sellers to the extent certain financial targets are exceeded and upon the achievement of product rollout targets.

One earnout is payable upon the achievement of product rollout targets.

The second earnout is payable during 2026 if the company exceeds certain earnings targets.

The contractual obligation associated with the contingent earnout provisions recognized on the acquisition date amount to $ 9.4 million.

Certain intangible assets are pending external valuation and are preliminarily valued using historical information from the Residential Kitchen Equipment Group and Commercial Foodservice Equipment Group and qualitative assessments of the individual businesses at acquisition date.

Specifically, the company estimated the fair values of the intangible assets based on the percentage of purchase price assigned to similar intangible assets in previous acquisitions.

Thus, the provisional measurements of fair values set forth above are subject to change.

The company expects to complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date.

Pro Forma Financial Information

In accordance with ASC 805 Business Combinations , the following unaudited pro forma results of operations for the twelve months ended January 2, 2021 and December 28, 2019, assumes the 2019 and 2020 acquisitions described above were completed on December 30, 2018 (first day of fiscal year 2019).

The following pro forma results include adjustments to reflect amortization of intangibles associated with the acquisition and the effects of adjustments made to the carrying value of certain assets (in thousands, except per share data):

In accordance with ASC 805 Business Combinations , the following unaudited pro forma results of operations for the twelve months ended January 1, 2022 and January 2, 2021, assumes the 2020 and 2021 acquisitions described above were completed on December 29, 2019 (first day of fiscal year 2020).

The following pro forma results include adjustments to reflect amortization of intangibles associated with the acquisitions and the effects of adjustments made to the carrying value of certain assets (in thousands, except per share data):

Twelve Months Ended

January 2, 2021 December 28, 2019

January 1, 2022 January 2, 2021

Net sales $ 3,732,010 $ 2,980,164

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The company's fiscal year ends on the Saturday nearest December 31.

Fiscal years 2020, 2019, and 2018 ended on January 2, 2021, December 28, 2019 and December 29, 2018, respectively, and included 53, 52 and 52 weeks, respectively.

Fiscal years 2021, 2020, and 2019 ended on January 1, 2022, January 2, 2021 and December 28, 2019, respectively, and included 52, 53 and 52 weeks, respectively.

(b) Cash and Cash Equivalents

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Accounts receivable, as shown in the consolidated balance sheets, are net of allowances for doubtful accounts of $ 19.2 million and $ 14.9 million at January 2, 2021 and December 28, 2019, respectively.

Accounts receivable, as shown in the consolidated balance sheets, are net of allowances for doubtful accounts of $ 18.8 million and $ 19.2 million at January 1, 2022 and January 2, 2021, respectively.

At January 1, 2022, all accounts receivable are expected to be collected within one year.

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The company estimates reserves for inventory obsolescence and shrinkage based on its judgment of future realization.

Inventories at January 2, 2021 and December 28, 2019 are as follows (in thousands):

Inventories at January 1, 2022 and January 2, 2021 are as follows (in thousands):

Raw materials and parts $ 421,361 $ 263,200

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Asset impairments are recorded whenever events or changes in circumstances indicate that the recorded value of an asset is greater than the sum of its expected future undiscounted cash flows.

Asset impairments are recorded at the amount by which the recorded value of an asset exceeds its fair value.

(f) Goodwill and Other Intangibles

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Goodwill and indefinite-lived intangible assets are not amortized, but are subject to impairment testing.

The company performs the annual impairment assessment for goodwill and indefinite-lived intangible assets as of first day of the fourth quarter and more frequently if indicators of impairment exist.

The company performs the annual impairment assessment for goodwill and indefinite-lived intangible assets as of first day of the fourth quarter of the fiscal year and more frequently if indicators of impairment exist.

The goodwill impairment test is performed at the reporting unit level.

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Fair value is determined using a combination of present value techniques and market prices of comparable businesses.

The company completed its annual impairment test for goodwill as of September 27, 2020.

The company performed a qualitative assessment to evaluate goodwill for all reporting units.

As a result of the financial performance indicators for the Commercial Foodservice reporting unit, the company completed a quantitative analysis.

The fair value of the reporting unit exceeded its carrying value by more than 100% and no impairment of goodwill was recognized.

Based on the qualitative assessment for all other reporting units it was determined there was no impairment of goodwill.

The company has not recognized any goodwill impairments and therefore there are no accumulated impairment losses.

The company performed a qualitative assessment as of October 3, 2021 over all three reporting units and determined it is not more likely than not that the fair values of our reporting units are less than the carrying amounts and therefore quantitative analysis is not required.

No impairment was recognized and the company has not recognized any goodwill impairments and therefore there are no accumulated impairment losses.

Goodwill is allocated to the business segments as follows (in thousands):

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Exchange effect 18,167 6,851 9,741 34,759

Balance as of December 28, 2019 $ 1,153,552 $ 257,679 $ 438,516 $ 1,849,747

Balance as of January 2, 2021 $ 1,228,436 $ 255,798 $ 450,027 $ 1,934,261

Goodwill acquired during the year 63,849 — 266,170 330,019

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Intangible assets consist of the following (in thousands):

January 2, 2021 December 28, 2019

January 1, 2022 January 2, 2021

Amount Accumulated

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$ 950,484 $ ( 442,208 ) $ 797,638 $ ( 374,061 )

Indefinite-lived assets:

Trademarks and tradenames $ 1,026,804 $ 997,066

The company completed its annual impairment for other intangibles as of September 27, 2020.

We identified indicators of impairment associated with certain tradenames within all three of our business segments based on the qualitative assessment, which required the completion of a quantitative impairment assessment.

The primary indicators of impairment were lower than expected revenue performance in the current year, forecasted revenues for future periods and market conditions.

Based on the results of the quantitative assessment, the company recorded impairment charges of $ 11.6 million associated with several tradenames, none of which were individually material.

The company recorded charges of $ 5.3 million associated with trademarks within the Commercial Foodservice Equipment Group, $ 5.4 million for the Food Processing Equipment Group and $ 0.9 million for the Residential Kitchen Equipment Group.

The gross value of the trademarks tested was approximately $ 90.0 million and the fair values of the other trademarks tested with no impairment per the analyses, exceeded their carrying values by more than 20 %.

In performing the quantitative assessment of indefinite-life intangible assets, primarily tradenames, the company estimated the fair value using the relief-from-royalty method which requires assumptions related to projected revenues;

assumed royalty rates that could be payable if we did not own the brand;

and a market participant discount rate based on a weighted-average cost of capital.

The company elected to perform a qualitative assessment on the other indefinite-life intangible assets noting no events that indicated that the fair value was less than carrying value that would require a quantitative impairment assessment.

The estimates of future cash flows used in determining the fair value of goodwill and intangible assets involve significant management judgment and are based upon assumptions about expected future operating performance, economic conditions, market conditions and cost of capital.

Indefinite-lived intangible assets:

Trademarks and trade names $ 1,367,101 $ 1,026,804

The company completed its annual impairment assessment for indefinite-lived intangible assets as of October 3, 2021.

Based on this qualitative assessment, the company determined it is not more likely than not that the fair values of our reporting units are less than the carrying amounts and therefore a quantitative impairment analysis was not required.

The estimates of future cash flows used in determining the fair value of goodwill and indefinite-lived intangible assets involve significant management judgment and are based upon assumptions about expected future operating performance, economic conditions, market conditions and cost of capital.

Inherent in estimating the future cash flows are uncertainties beyond our control, such as changes in capital markets.

The company continues to monitor the global impact of the COVID-19 pandemic to assess the outlook for demand of its products and the impact on its business and financial performance.

The actual cash flows could differ materially from management's estimates due to changes in business conditions, operating performance and economic conditions.

The company continues to monitor the global outbreak of the COVID-19 pandemic to assess the outlook for demand of its products and the impact on its business and financial performance.

The potential impact of the COVID-19 pandemic on demand, production levels, and operating results in the short-term is uncertain, but the company remains committed to the strategic actions necessary to realize long-term revenue and cash flow growth.

The potential negative demand effect on revenues is also uncertain given the volatile environment, but demand and production levels are anticipated to continue to recover.

During 2020 testing, the company recorded impairment charges of $ 11.6 million associated with several trade names, none of which were individually material.

Definite-lived intangible assets are amortized over their estimated useful lives and tested for impairment in accordance with the methodology discussed above under "Property, Plant and Equipment."

The aggregate intangible amortization expense was $ 75.8 million, $ 69.0 million and $ 64.0 million in 2021, 2020 and 2019, respectively.

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(g) Accrued Expenses

Accrued expenses consist of the following at January 2, 2021 and December 28, 2019, respectively (in thousands):

Accrued payroll and related expenses $ 93,926 $ 80,621

Accrued expenses consist of the following at January 1, 2022 and January 2, 2021, respectively (in thousands):

Contract liabilities $ 133,315 $ 93,871

Accrued payroll and related expenses 115,762 93,926

Accrued warranty 80,215 69,667

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Accrued short-term leases 22,753 22,493

Accrued liabilities held for sale 22,313 —

Accrued sales and other tax 22,684 22,030

Accrued interest rate swaps 14,075 —

Accrued product liability and workers compensation 12,909 15,164

Accrued professional fees 19,292 12,133

Accrued agent commission 13,670 11,105

Accrued restructuring 2,686 1,121

Accrued product liability and workers compensation 10,952 12,909

Accrued interest rate swaps 1,171 14,075

Accrued liabilities held for sale — 22,313

Other accrued expenses 90,590 76,316

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$ ( 249,696 ) $ ( 400,919 )

Unrealized gain on interest rate swap, net of tax of $( 13,120 ) and $( 5,973 )

Unrealized loss on interest rate swap, net of tax of $( 4,501 ) and $( 13,120 )

( 13,064 ) ( 37,548 )

Unrealized gain on certain investments, net of tax of $ 433 and $ —

Currency translation adjustments ( 97,654 ) ( 49,961 )

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

Currency Translation Adjustment Pension Benefit Costs Unrealized Gain/(Loss) Interest Rate Swap Total

Currency Translation Adjustment Pension Benefit Costs Unrealized Gain/(Loss) Interest Rate Swap Unrealized Gain Certain Investments Total

Balance as of December 28, 2019 $ ( 105,705 ) $ ( 228,336 ) $ ( 16,892 ) $ — $ ( 350,933 )

Adoption of ASU 2017-12 (2)

Other comprehensive income before reclassification 55,744 ( 174,826 ) ( 36,170 ) — ( 155,252 )

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Net current-period other comprehensive income $ 55,744 $ ( 172,583 ) $ ( 20,656 ) — $ ( 137,495 )

Balance as of December 28, 2019 $ ( 105,705 ) $ ( 228,336 ) $ ( 16,892 ) $ ( 350,933 )

Balance as of January 2, 2021 $ ( 49,961 ) $ ( 400,919 ) $ ( 37,548 ) $ — $ ( 488,428 )

Other comprehensive income before reclassification ( 47,693 ) 137,187 6,015 1,330 96,839

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Balance as of January 1, 2022 $ ( 97,654 ) $ ( 249,696 ) $ ( 13,064 ) $ 1,330 $ ( 359,084 )

(1) As of January 2, 2021 pension and interest rate swap amounts are net of tax of $( 89.1 ) million and $( 13.1 ) million, respectively.

During the twelve months ended January 2, 2021, the adjustments to pension benefit costs and unrealized gain/(loss) interest rate swap were net of tax of $( 40.4 ) million and $( 7.1 ) million, respectively.

(2) As of December 30, 2018, the company adopted ASU No.

2017-12, "Derivatives and Hedging (Topic 815):

Targeted Improvements to Accounting for Hedging Activities" using the modified retrospective method.

The adoption of this guidance resulted in the recognition of less than $( 0.1 ) million as an adjustment to the opening balance of retained earnings.

(1) As of January 1, 2022 pension, unrealized gain/(loss) interest rate swap and gain on certain investments amounts are net of tax of $( 39.5 ) million, $( 4.5 ) million and $ 0.4 million, respectively.

During the twelve months ended January 1, 2022, the adjustments to pension benefit costs unrealized gain/(loss) interest rate swap and gain on certain investments were net of tax of $ 49.6 million, $ 8.6 million and $ 0.4 million, respectively.

(j) Fair Value Measures

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Level 3 – Unobservable inputs based on our own assumptions

The company’s financial assets and liabilities that are measured at fair value are categorized using the fair value hierarchy at January 2, 2021 and December 28, 2019 are as follows (in thousands):

The company’s financial assets and liabilities that are measured at fair value are categorized using the fair value hierarchy at January 1, 2022 and January 2, 2021 are as follows (in thousands):

Level 1 Fair Value

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As of January 1, 2022

Financial Liabilities:

Financial Assets:

Interest rate swaps $ — $ 3,645 $ — $ 3,645

Contingent consideration $ — $ — $ 25,558 $ 25,558

Foreign exchange derivative contracts $ — $ 1,095 $ — $ 1,095

As of December 28, 2019

Financial Assets:

Financial Liabilities:

Interest rate swaps $ — $ 21,635 $ — $ 21,635

Contingent consideration $ — $ — $ 34,983 $ 34,983

As of January 2, 2021

Financial Liabilities:

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Foreign exchange derivative contracts $ — $ 2,191 $ — $ 2,191

The contingent consideration, as of January 2, 2021 and December 28, 2019, relates to the earnout provisions recorded in conjunction with various purchase agreements.

The contingent consideration, as of January 1, 2022 and January 2, 2021, relates to the earnout provisions recorded in conjunction with various purchase agreements.

The earnout provisions associated with these acquisitions are based upon performance measurements related to sales and earnings, as defined in the respective purchase agreements.

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Exchange gains and losses on foreign currency transactions are included in determining net income for the period in which they occur.

These transactions amounted to a loss of $ 2.9 million, gain of $ 0.9 million and a loss of $ 2.6 million in 2020, 2019 and 2018, respectively, and are included in other expense on the statements of earnings.

These transactions amounted to a gain of $ 0.3 million, loss of $ 2.9 million and a loss of $ 0.9 million in 2021, 2020 and 2019, respectively, and are included in other expense on the statements of earnings.

(l) Shipping and Handling Costs

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(o) Non-Cash Share-Based Compensation

The company estimates the fair value of restricted share grants and stock options at the time of grant and recognizes compensation costs over the vesting period of the awards and options.

Non-cash share-based compensation expense of $ 19.6 million, $ 8.1 million and $ 2.5 million was recognized for fiscal 2020, 2019 and 2018, respectively, associated with restricted share grants.

The company recorded a related tax benefit of $ 2.7 million, $ 0.5 million and less than $ 0.1 million in fiscal 2020, 2019 and 2018, respectively.

As of January 2, 2021, there was $ 44.3 million of total unrecognized compensation cost related to nonvested restricted share grant compensation arrangements, if all performance conditions are fully achieved.

The remaining weighted average life is 1.24 years.

Share grant awards not subject to market conditions for vesting are valued at the closing share price of the company’s stock as of the date of the grant.

The company issued 389,993 and 537,059 restricted share grant awards in 2020 and 2019, respectively, with a fair value of $ 22.5 million and $ 60.8 million, respectively.

Share grant awards issued in 2020 and 2019 are generally performance based and were not subject to market conditions.

The weighted average fair value of $ 57.74 and $ 113.26 per share for the awards for 2020 and 2019, respectively, represent the closing share price of the company’s stock as of the date of grant.

On December 31, 2020, the company issued restricted stock units, which entitle the holder to shares of common stock subject to time vesting and the achievement of certain market and performance goals.

Compensation expense is recognized over the performance measurement period of the units in accordance with ASC 718 Stock Compensation for awards with market and performance vesting conditions.

The fair value of restricted stock units granted during 2020 was $ 135.31 and no restricted stock units have vested.

As of January 2, 2021, there was $ 10.7 million of total unrecognized compensation cost related to nonvested restricted stock unit compensation arrangements, if all performance conditions are fully achieved.

The remaining weighted average life is 2.18 years.

The company's 2021 Stock Incentive Plan (the "2021 Plan"), allows for the granting of stock options, stock appreciation rights, restricted stock and restricted stock units, performance stock, phantom units and other equity-based awards.

The company estimates the fair value of restricted stock grants, restricted stock units and performance stock at the time of grant and recognizes compensation costs over the vesting period of the grants.

The expense, net of forfeitures, is recognized using the straight-line method.

Non-cash share-based compensation expense is only recognized for those grants expected to vest.

See Note 6, "Common and Preferred Stock," for further information on the company's share-based incentive plans.

(p) Earnings Per Share

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

The company’s potentially dilutive securities consist of shares issuable on exercise of outstanding options and vesting of restricted stock grants computed using the treasury method and amounted to 43,000 , 9,000 , and 28,000 for fiscal 2020, 2019 and 2018, respectively.

During fiscal 2020, the average market price of the company's common stock has not exceeded the exercise price of the Convertible Notes and there have been no conversions to date, and as a result there is no impact to the diluted earnings per share.

The company’s potentially dilutive securities consist of shares issuable on exercise of outstanding options and vesting of restricted stock grants computed using the treasury method and amounted to approximately 1,449,000 , 43,000 , and 9,000 for fiscal 2021, 2020 and 2019, respectively.

The company’s potentially dilutive securities consist of shares issuable on vesting of restricted stock grants computed using the treasury method and amounted to approximately 56,000 for fiscal 2021.

During fiscal 2021, the average market price of the company's common stock exceeded the exercise price of the Convertible Notes resulting in approximately 1,393,000 diluted stock equivalents to be included in the diluted net earnings per share.

There have been no conversions to date.

See Note 5, Financing Arrangements, in these Notes to the Consolidated Financial Statements for further details on the Convertible Notes.

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Accounting Pronouncements - Recently Adopted

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments”, and has since modified the standard with several ASUs (collectively, the “new credit loss standard”).

The new credit loss standard requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected.

The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount.

The company adopted the new standard as of December 29, 2019 (first day of fiscal year 2020) using the modified retrospective approach.

As a result of the company's assessment process on its receivables and contract assets portfolio, which is the only financial instrument in scope of this standard, the adoption of this guidance did not have a material impact on the company's Consolidated Financial Statements.

In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment".

The amendments in ASU-04 simplify the subsequent measurement of goodwill, by removing the second step of the goodwill impairment test.

An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value.

The new guidance does not amend the optional qualitative assessment of goodwill impairment.

The company adopted this guidance on December 29, 2019 on a prospective basis.

The adoption of this guidance did not have an impact on the company's Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement".

The amendments in ASU-13 remove, modify and add various disclosure requirements around fair value measurement in order to clarify and improve the cost-benefit nature of disclosures.

The company adopted this guidance on December 29, 2019 on a prospective basis.

The adoption of this guidance did not have an impact on the company's Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20)".

The amendments in ASU-14 remove, modify and add various disclosure requirements around the topic in order to clarify and improve the cost-benefit nature of disclosures.

The company adopted this guidance on December 29, 2019 on a retrospective basis for all periods presented.

The adoption of this guidance did not have an impact on the company's Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)".

The amendments in ASU-15 align the requirements for capitalizing implementation costs in a service contract hosting arrangement with those of developing or obtaining internal-use software.

The company adopted this guidance on December 29, 2019 on a prospective basis.

The adoption of this guidance did not have an impact on the company's Consolidated Financial Statements.

Accounting Pronouncements - To be adopted

In December 2019, the FASB issued ASU 2019-12, "Simplifying the Accounting for Income Taxes (Topic 740)", which removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

This guidance also clarifies and simplifies other areas of ASC 740.

This guidance is effective for annual reporting periods, and interim periods within those reporting periods, beginning after December 15, 2020 with early adoption permitted.

Certain amendments in this update must be applied on a prospective basis, certain amendments must be applied on a retrospective basis, and certain amendments must be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings in the period of adoption.

The company intends to adopt this guidance on January 3, 2021, and does not expect a material impact on the company's Consolidated Financial Statements upon adoption.

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting".

Subject to meeting certain criteria, ASU 2020-04 provides optional expedients and exceptions to applying contract modification accounting under existing generally accepted accounting principles, for contracts that are modified to address the expected phase out of the London Inter-bank Offered Rate (“LIBOR”) by the end of 2021.

Some of the Company’s contracts with respect to its borrowings and interest rate swap contracts already contain comparable alternative reference rates that would automatically take effect upon the phasing out of LIBOR, while for others, the company anticipates negotiating comparable replacement rates with its counterparties.

In January 2021, the FASB issued ASU 2021-01 to provide supplemental guidance and to further clarify the scope.

This guidance is effective for all entities from the beginning of an interim period that includes the issuance date of the ASU.

An entity may elect to apply the amendments prospectively through December 31, 2022.

The company is currently evaluating the impacts the adoption of this guidance will have on its Consolidated Financial Statements.

In August 2020, the FASB issued ASU No.

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Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity," which simplifies the accounting for convertible instruments by eliminating the requirement to separate embedded conversion features from the host contract when the conversion features are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital.

By removing the separation model, a convertible debt instrument will be reported as a single liability instrument with no separate accounting for embedded conversion features.

By removing the separation model, a convertible debt instrument is reported as a single liability instrument with no separate accounting for embedded conversion features.

This new standard also removes certain settlement conditions that are required for contracts to qualify for equity classification and simplifies the diluted earnings per share calculations by requiring that an entity use the if-converted method and that the effect of potential share settlement be included in diluted earnings per share calculations.

Effective January 3, 2021, the company early adopted ASU 2020-06 using the modified retrospective approach.

Adoption of the new standard resulted in an increase to the opening balance of retained earnings of $ 5.1 million, a decrease to additional paid-in capital of $ 79.4 million, and an increase to convertible senior notes of $ 98.4 million.

In addition, the company ceased recording non-cash interest expense associated with amortization of the debt discount and calculates earnings per share using the if-converted method to the extent those shares are not anti-dilutive.

This guidance also clarifies and simplifies other areas of ASC 740.

This guidance is effective for annual reporting periods, and interim periods within those reporting periods, beginning after December 15, 2020 with early adoption permitted.

The amendments are required to be adopted on either a modified retrospective method or a fully retrospective method.

Upon adoption, the Company expects a decrease to additional paid in capital, an increase in the carrying value of the Convertible Notes and an increase to retained earnings.

After adoption, the Company expects a reduction in its reported interest expense.

The company is anticipating early adoption and will continue to evaluate the impact this guidance will have on its Consolidated Financial Statements.

The company adopted this guidance on January 3, 2021, and it did not have a material impact on the company's Consolidated Financial Statements upon adoption.

In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848)," which clarified that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition related to reference rate reform.

The amendments in this update were effective immediately for all entities.

The adoption of this guidance did not materially impact the company's Consolidated Financial Statements.

Accounting Pronouncements - To be adopted

On May 3, 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options.

This new standard provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange.

This guidance is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Early adoption is permitted, including adoption in an interim period.

The company is currently evaluating the impacts the adoption of this guidance will have on its Consolidated Financial Statements and disclosures.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), Disclosures by Business Entities About Government Assistance, which requires entities to provide disclosures on material government assistance transactions for annual reporting periods.

The disclosures include information around the nature of the assistance, the related accounting policies used to account for government assistance, the effect of government assistance on the entity’s financial statements, and any significant terms and conditions of the agreements, including commitments and contingencies.

The new standard is effective for the company on January 2, 2022 and only impacts annual financial statement footnote disclosures.

The company is currently evaluating the impacts the adoption of this guidance will have on its Consolidated Financial Statements and disclosures.

(4) REVENUE RECOGNITION

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The company’s contracts can have multiple performance obligations or just a single performance obligation.

The company treats shipping and handling activities performed after the customer obtains control of the good as a contract fulfillment activity.

The company generally expenses sales commissions when incurred because the amortization period would have been less than one year.

These costs are recorded within selling, general and administrative expenses.

For contracts with multiple performance obligations, the contracts transaction price is allocated to each performance obligation using the company’s best estimate of the standalone selling price of each distinct good or service in the contract.

As the company’s standard payment terms are less than one year, the company does not assess whether a contract has a significant financing component.

The company treats shipping and handling activities performed after the customer obtains control of the good as a contract fulfillment activity.

Sales, use and value added taxes assessed by governmental authorities are excluded from the measurement of the transaction price within the company’s contracts with its customers.

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Total $ 2,032,761 $ 480,746 $ 737,285 $ 3,250,792

Twelve Months Ended December 28, 2019

Twelve Months Ended January 2, 2021

United States and Canada $ 1,067,872 $ 311,042 $ 373,864 $ 1,752,778

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

January 2, 2021 December 28, 2019

January 1, 2022 January 2, 2021

Contract assets $ 21,592 $ 20,328

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Long-term debt $ 2,387,001 $ 1,706,652

On January 31, 2020, the company entered into an amended and restated five-year, $ 3.5 billion multi-currency senior secured credit agreement (as amended as described below, the "Credit Facility").

The Credit Facility amended the company's pre-existing $ 3.0 billion credit facility, which had an original maturity of July 2021, to provide for (i) a $ 750.0 million term loan facility and (ii) a $ 2.75 billion multi-currency revolving credit facility, with the potential under certain circumstances, to increase the amount of the credit facility to up to a total of $ 4.0 billion (plus additional amounts, subject to compliance with a senior secured net leverage ratio).

The Credit Facility matures on January 31, 2025.

The term loan facility will amortize in equal quarterly installments due on the last day of each fiscal quarter, commencing with the first full fiscal quarter after January 31, 2020, in an aggregate annual amount equal to 2.50 % of the original aggregate principal amount of the term loan facility, with the balance, plus any accrued interest, due and payable on January 31, 2025.

On October 21, 2021, the company entered into an amended and restated five-year, $ 4.5 billion multi-currency senior secured credit agreement (the "Credit Facility") that amends and restates the company's pre-existing $ 3.1 billion credit facility which had an original maturity of January 31, 2025.

The Credit Facility consists of (i) a $ 1 billion term loan facility, (ii) a $ 750 million delayed draw term loan facility, and (iii) a $ 2.75 billion multi-currency revolving credit facility, with the potential under certain circumstances, to increase the amount of the credit facility by the greater of $ 625 million and 100 % of consolidated EBITDA for the most recently ended period of consecutive fiscal quarters (plus additional amounts, subject to compliance with a senior secured net leverage ratio), either by increasing the revolving commitment or by adding one or more revolver or term loan tranches.

The Credit Facility matures on October 21, 2026, with the potential to extend the maturity date in one year increments with the consent of the extending lenders.

The term facility will amortize in equal quarterly installments due on the last day of each fiscal quarter, commencing with the first full fiscal quarter after October 21, 2021, in an aggregate amount equal to 2.50 % of the original aggregate principal amount of the term loan facility, with the balance, plus any accrued interest, due and payable on October 21, 2026.

The delayed draw term loan facility is available for borrowing within one year and will amortize in quarterly installments due on the last day of each fiscal quarter, commencing with the first full fiscal quarter after each delayed draw term loan borrowing in an amount equal to 0.625 % of the original aggregate principal amount of such borrowing, with the balance, plus any accrued interest, due and payable on October 21, 2026.

Fees associated with the amendment of the term loan facilities are recorded as a direct deduction from the related debt liability in the Consolidated Balance Sheets and amortized to interest expense over the term of the Credit Facility.

On August 21, 2020, the company issued $ 747.5 million aggregate principal amount of 1.00 % Convertible Senior Notes due 2025 in a private offering pursuant to an indenture, dated August 21, 2020 (the "Indenture"), between the company and U.S.

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The net proceeds from the sale of the Convertible Notes were approximately $ 729.9 million after deducting the initial purchasers' discounts and the offering expenses payable by the company.

In connection with the pricing of the Convertible Notes, the company entered into privately negotiated Capped Call Transactions 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 Capped Call Transactions initially cover, subject to customary anti-dilution adjustments, the number of shares of the company's common stock that underlie the Convertible Notes.

The company used a portion of the net proceeds from the offering of the Convertible Notes to prepay $ 400.0 million aggregate principal amount of its term loan obligations owed under its Credit Facility, which was amended concurrently with the issuance of the Convertible Notes.

The Credit Facility, as amended, is in an aggregate principal amount of $ 3.1 billion, consisting of (i) a $ 350 million term loan facility and (ii) a $ 2.75 billion multi-currency revolving credit facility.

The maturity date remains unchanged at January 31, 2025.

The company is using the remaining net proceeds for general corporate purposes, including the financing of its operations, the potential repayment of additional indebtedness and potential acquisitions and other strategic transactions.

In connection with the pricing of the Convertible Notes, the company entered into privately negotiated Capped Call Transactions (the "2020 Capped Call Transactions") and the company used the net proceeds of the offering of the Convertible Notes to pay the aggregate amount of $ 104.7 million for them.

In December 2021, the company entered into two tranches of privately negotiated Capped Call Transactions (the "2021 Capped Call Transactions") in the aggregate amount of $ 54.6 million.

The 2020 and 2021 Capped Call Transactions initially cover, subject to customary anti-dilution adjustments, the number of shares of the company's common stock that underlie the Convertible Notes.

Credit Facility

As of January 2, 2021, the company had $ 1.1 billion of borrowings outstanding under the Credit Facility, including $ 335.9 million outstanding under the term loan.

As of January 1, 2022, the company had $ 1.7 billion of borrowings outstanding under the Credit Facility, including $ 1.0 billion outstanding under the term loan ($ 993 million, net of unamortized issuance fees).

The company also had $ 2.7 million in outstanding letters of credit as of January 1, 2022, which reduces the borrowing availability under the Credit Facility.

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Additionally, a commitment fee based upon the Leverage Ratio is charged on the unused portion of the commitments under the Credit Facility.

As a result of the amendment, for the quarterly periods extending through the second fiscal quarter of 2021, borrowings under the Credit Facility will accrue interest at a minimum of 2.00 % above LIBOR and the variable unused commitment fee will be at a minimum of 0.35 %.

Borrowings under the Credit Facility will accrue interest at a minimum of 1.375 % above LIBOR and the variable unused commitment fee will be at a minimum of 0.20 %.

The average interest rate per annum, inclusive of hedging instruments, on the debt under the Credit Facility was equal to 2.32 % at the end of the period and the variable commitment fee was equal to 0.20 % per annum as of January 1, 2022.

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The carrying value and estimated aggregate fair value, a level 2 measurement, based primarily on market prices, of debt excluding the Convertible Notes is as follows (in thousands):

Jan 2, 2021 Dec 28, 2019

Jan 1, 2022 Jan 2, 2021

Carrying Value Fair Value Carrying Value Fair Value

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At January 1, 2022, the company had outstanding floating-to-fixed interest rate swaps totaling $ 94.0 million notional amount carrying an average interest rate of 1.45 % maturing in less than 12 months and $ 708.0 million notional amount carrying an average interest rate of 1.98 % that mature in more than 12 months but less than 63 months.

In February 2022, subsequent to year end fiscal 2021, the company entered into an additional floating-to-fixed interest rate swap agreements totaling $ 375.0 million notional amount carrying an average interest rate of 1.50 %.

The terms of the Credit Facility, as amended, limit the ability of the company and its subsidiaries to, with certain exceptions:

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and requires, among other things, the company to satisfy certain financial covenants:

(i) a minimum Interest Coverage Ratio (as defined in the Credit Facility) of 3.00 to 1.00 , (ii) a maximum Total Leverage Ratio of Funded Debt less Unrestricted Cash to Pro Forma EBITDA (each as defined in the Credit Facility) of 5.50 to 1.00 , and (iii) a maximum Secured Leverage Ratio of Funded Debt less Unrestricted Cash to Pro Forma EBITDA (each as defined in the Credit Facility) of 3.50 to 1.00 ;

which may be adjusted to 4.00 to 1.00 for a four consecutive fiscal quarter period in connection with certain qualified acquisitions, subject to the terms and conditions contained in the Credit Facility.

the maximum secured leverage ratio is permitted to be at higher amounts for periods extending through the second fiscal quarter of 2021, after which time covenants will revert to their original levels.

(i) a minimum Interest Coverage Ratio (as defined in the Credit Facility) of 3.00 to 1.00 , (ii) a maximum Secured Leverage Ratio (as defined in the Credit Facility) of Funded Debt less Unrestricted Cash to Pro Forma EBITDA (each as defined in the Credit Facility) of 3.75 to 1.00 , which may be adjusted to 4.25 to 1.00 for a four consecutive fiscal quarter period in connection with certain qualified acquisitions, subject to the terms and conditions contained in the Credit Facility.

The Credit Facility is secured by substantially all of the assets of Middleby Marshall, the company and the company's domestic subsidiaries and is unconditionally guaranteed by, subject to certain exceptions, the company and certain of the company's direct and indirect material foreign and domestic subsidiaries.

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At January 1, 2022, the company was in compliance with all covenants pursuant to its borrowing agreements.

The company has run various scenarios to estimate the impact of the COVID-19 pandemic and continues to believe that its future cash generated from operations, together with its capacity under its Credit Facility and its cash on hand, will provide adequate resources to meet its working capital needs and cash requirements and maintain compliance with financial covenants in its Credit Facility for at least the next 12 months.

Convertible Notes

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Unamortized debt discount — ( 98,358 )

Unamortized issuance costs ( 13,083 ) ( 16,295 )

Net carrying amount $ 734,417 $ 632,847

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Total interest expense $ 10,938 $ 10,691

The estimated fair value of the Convertible Notes was $ 910.1 million as of January 2, 2021 and was determined through consideration of quoted market prices.

The estimated fair value of the Convertible Notes was $ 1.2 billion as of January 1, 2022 and was determined through consideration of quoted market prices.

The fair value is classified as Level 2, as defined in Note 3 (j), Fair Value Measurements , in these Notes to the Consolidated Financial Statements included in this Part II, Item 8 of this Annual Report on Form 10-K .

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and are structurally subordinated to all existing and future indebtedness and liabilities of the company’s subsidiaries.

In accounting for the issuance of the Convertible Notes, the company separated the Convertible Notes into liability and equity components.

The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature.

The carrying amount of the equity component, representing the conversion option, which does not meet the criteria for separate accounting as a derivative as it is indexed to the company's own stock, was determined by deducting the fair value of the liability component from the par value of the Convertible Notes.

The difference between the principal amount of the Convertible Notes and the liability component represents the debt discount, which is recorded as a direct deduction from the related debt liability in the Consolidated Balance Sheets and amortized to interest expense using the effective interest method over the term of the Convertible Notes.

The effective interest rate of the Convertible Notes is 4.7 %.

The equity component of the Convertible Notes of approximately $ 105.0 million is included in the additional paid-in capital in the Consolidated Balance Sheets and is not remeasured as long as it continues to meet the conditions for equity classification.

The company allocated transaction costs related to the Convertible Notes using the same proportions as the proceeds from the Convertible Notes.

Transaction costs attributable to the liability component were recorded as a direct deduction from the related debt liability in the Consolidated Balance Sheets and amortized to interest expense over the term of the Convertible Notes, and transaction costs attributable to the equity component were netted with the equity component in stockholders' equity.

The company initially separated the Convertible Notes into liability and equity components.

The equity component of the Convertible Notes of approximately $ 105.0 million was included in the additional paid-in capital and the resulting debt discount was being amortized to interest expense at an effective interest rate of 1.5 %, which is no longer applicable upon adoption of ASU 2020-06 as discussed in Note 3 to the Consolidated Financial Statement.

The Convertible Notes were issued pursuant to the Indenture and bear interest semi-annually in arrears at a rate of 1.00 % per annum on March 1 and September 1 of each year.

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Under the 2020 Capped Call Transactions, the number of shares of common stock issuable at the conversion price of $ 207.93 is expected to be 3.6 million shares.

The Convertible Notes were not convertible during the twelve months period ended January 2, 2021 and none have been converted to date.

Also given the average market price of the company's common stock has not exceeded the exercise price since inception, there is no impact to the diluted earnings per share.

Under the 2021 Capped Call Transactions, the number of shares of common stock issuable at the conversion prices of $ 216.50 and $ 225.00 is expected to be 3.5 million shares and 3.3 million shares, respectively.

During the twelve months period ended January 1, 2022, no Convertible Notes have been converted to date.

The company may redeem all or any portion of the Convertible Notes, at its option, on or after September 5, 2023 and prior to the 41st scheduled trading day immediately preceding the maturity date, at a redemption price equal to 100.0 % of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest thereon, if the last reported sales price of the company's common stock has been at least 130.0 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the company provides written notice of redemption.

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Capped Call Transactions

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 and 2021 Capped Call Transactions (collectively, the "Capped Call Transactions") are expected generally to reduce the potential dilution and/or offset the cash payments the company is required to make in excess of the principal amount of the Convertible Notes upon conversion of the Convertible Notes in the event that the market price per share of the company's common stock is greater than the strike price of the Capped Call Transactions (which initially corresponds to the initial conversion price of the Convertible Notes and is subject to certain adjustments under the terms of the Capped Call Transactions), with such reduction and/or offset subject to a cap based on the cap price of the Capped Call Transactions.

The 2020 Capped Call Transactions have an initial cap price of $ 207.93 per share of the company's common stock.

The 2021 Capped Call Transactions have initial cap prices of $ 216.50 and $ 225.00 per share of the company's common stock.

The Capped Call Transactions cover, initially, the number of shares of the company's common stock underlying the Convertible Notes, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes.

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(a) Shares Authorized

At January 2, 2021 and December 28, 2019, the company had 95,000,000 authorized shares of common stock and 2,000,000 authorized shares of non-voting preferred stock.

At January 1, 2022 and January 2, 2021, the company had 95,000,000 authorized shares of common stock and 2,000,000 authorized shares of non-voting preferred stock.

(b) Treasury Stock

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During 2020, the company repurchased 896,965 shares of its common stock under the program for $ 69.7 million, including applicable commissions, which represented an average price of $ 77.70 .

During 2021, the company repurchased 141,500 shares of its common stock under the program for $ 26.6 million, including applicable commissions, which represented an average price of $ 188.17 .

As of January 1, 2022, 1,164,665 shares had been purchased under the 2017 stock repurchase program and 1,335,335 remain authorized for repurchase.

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During 2020, the company repurchased 176,242 shares of its common stock that were surrendered to the company for withholding taxes related to restricted stock vestings for $ 16.2 million.

During 2021, the company repurchased 15,480 shares of its common stock that were surrendered to the company for withholding taxes related to restricted stock vestings for $ 2.7 million.

The company maintains several stock incentive plans under which the company's Board of Directors issues restricted share grants to key employees.

Restricted share grants issued to employees are transferable upon certain vesting requirements being met.

The 2011 Stock Incentive Plan (the "2011 Plan") was adopted on April 1, 2011, under which the company's Board of Directors issues stock grants to key employees.

On July 11, 2017 the company increased the maximum amount of shares reserved for issuance under the 2011 Plan by 1,000,000 .

A maximum amount of 2,650,000 shares can be issued under the 2011 Plan.

Stock grants issued to employees are transferable upon certain vesting requirements.

As of January 2, 2021, a total of 2,137,168 share-based awards have been issued under the 2011 Plan.

This includes 2,042,168 restricted share grants, of which 433,065 remain outstanding and unvested.

For fiscal year ended January 2, 2021, the approximate fair value of restricted shares vested were $ 44.8 million.

This also includes 95,000 restricted stock units, of which 95,000 remain unvested.

For fiscal year ended January 2, 2021, no restricted stock units have vested.

A summary of the company’s nonvested restricted share grant activity and their corresponding fair value on the date of grant for fiscal years ended January 2, 2021 and December 28, 2019 is as follows:

The company maintains an incentive plan under which the company's Board of Directors grants share-based awards to key employees.

On May 10, 2021, the 2021 Stock Incentive Plan (the "2021 Plan") was approved, which included a maximum amount of 1,350,000 shares allowed to be awarded plus the shares remaining for future grants under the 2011 Stock Incentive Plan (the "2011 Plan") as of the approval date and any shares outstanding that are subsequently forfeited or expired.

Thus, no further shares are available to grant under the 2011 Plan and the maximum amount of shares available for future grants under the 2021 Plan as of January 1, 2022 is 1,642,966 .

Non-cash share-based compensation of $ 42.3 million, $ 19.6 million and $ 8.1 million was recognized for fiscal 2021, 2020 and 2019, respectively, associated with restricted share grants and restricted stock units.

The company recorded a related tax benefit of $ 0.4 million, $ 2.7 million and less than $ 0.5 million in fiscal 2021, 2020 and 2019, respectively.

Restricted share grants:

The company has issued restricted share grant awards, which are generally time and performance based and were not subject to market conditions.

The fair value of restricted share grants represents the closing share price of the company's stock as of the date of the grant and is recognized over the vesting period of the awards.

The weighted average grant date fair value was $ 181.31 , $ 57.74 and $ 113.26 per share for restricted share grants in fiscal 2021, 2020 and 2019 respectively, which represents the closing share price of the company’s stock as of the date of grant.

The approximate fair value of restricted shares vested were $ 7.3 million, $ 44.8 million, $ 16.5 million for fiscal 2021, 2020 and 2019, respectively.

A summary of the company’s nonvested restricted share grant activity and their corresponding fair value on the date of grant for fiscal year ended January 1, 2022 is as follows:

Shares Weighted

Nonvested shares at December 29, 2018 125,842 $ 103.29

Granted 537,059 113.26

Vested ( 135,816 ) 105.81

Forfeited — —

Nonvested shares at December 28, 2019 527,085 $ 112.60

Nonvested shares at January 2, 2021 433,065 $ 112.54

Granted 4,399 181.31

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Nonvested shares at January 1, 2022 180,306 $ 113.31

A summary of the company’s nonvested restricted stock unit activity and their corresponding fair value (based upon the Monte Carlo Methodology) on the date of grant for fiscal years ended January 2, 2021 is as follows:

As of January 1, 2022, there was $ 3.7 million of total unrecognized compensation cost related to nonvested restricted share grant compensation arrangements, if all performance conditions are fully achieved.

The remaining weighted average life is 0.34 years.

Restricted stock units:

During 2020, the company began granting restricted stock units, which entitle the holder to shares of common stock subject to time vesting and the achievement of certain market and performance goals.

The fair value for time based units are valued at the closing share price of the company’s stock as of the date of the grant and the fair value for performance units are based upon valuations using the Monte Carlo Methodology.

Compensation expense is recognized over the performance measurement period of the units in accordance with ASC 718 Stock Compensation for awards with market and performance vesting conditions.

Time vesting units vest equally over two or three years and performance units vest based on achievement of certain company performance criteria over the two or three year period, as set forth in the grant agreement ranging from 0 to 200% of the target shares granted.

The weighted average grant date fair value was $ 166.41 and $ 134.25 per share for restricted stock units in fiscal 2021 and 2020, respectively.

No restricted stock units have vested.

A summary of the company’s nonvested restricted stock unit activity at target shares and their corresponding fair value on the date of grant for fiscal year ended January 1, 2022 is as follows:

Units Weighted

Nonvested shares at December 28, 2019 — $ —

Nonvested shares at January 2, 2021 47,500 $ 134.25

Granted 287,624 166.41

Forfeited — —

Nonvested shares at January 1, 2022 335,124 $ 161.85

As of January 1, 2022, there was $ 66.2 million of total unrecognized compensation cost related to nonvested restricted stock unit compensation arrangements, if all performance conditions are fully achieved.

The remaining weighted average life is 1.74 years.

(7) INCOME TAXES

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Deferred tax changes ( 2.2 ) ( 0.7 ) —

Tax Cuts and Jobs Act of 2017 transition tax — — ( 0.1 )

Tax refunds ( 0.7 ) — —

Change in valuation allowances (1)

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The company’s effective tax rate for 2021 was 21.1 % as compared to 22.7 % in 2020.

The effective tax rate for 2020 reflects favorable tax adjustments for deferred tax rate changes and adjustments for the finalization of 2019 tax returns.

The effective tax rate for 2021 reflects favorable tax adjustments for deferred tax rate changes, tax refunds and adjustments for the finalization of 2020 tax returns.

The effective tax rate is higher than the federal tax rate of 21.0 % primarily due to state taxes and foreign tax rate differentials.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") was enacted in response to the coronavirus ("COVID-19") pandemic.

The CARES Act, among other things, includes provisions related to refundable payroll tax credits, deferment of the employer portion of social security payments, net operating loss carryback periods, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property.

The CARES Act did not have a material impact on the company’s Consolidated Financial Statements for the year ended January 2, 2021.

On December 27, 2020, the Consolidated Appropriations Act (“CAA”) was enacted in further response to the COVID-19 pandemic, in combination with omnibus spending for the 2021 federal fiscal year.

The CAA extended many of the provisions enacted by the CARES Act, the extension of which likewise did not have a material impact on the company’s Consolidated Financial Statements for the year ended January 2, 2021.

At January 2, 2021 and December 28, 2019, the company had recorded the following deferred tax assets and liabilities (in thousands):

At January 1, 2022 and January 2, 2021, the company had recorded the following deferred tax assets and liabilities (in thousands):

Deferred tax assets:

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Interest rate swaps 4,573 12,997

Convertible debt 37,034 —

Net operating loss carryforwards 17,083 20,747

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Depreciable assets ( 26,996 ) ( 26,916 )

Basis difference on affiliates ( 18,795 ) —

Operating lease right-of-use assets ( 18,029 ) ( 15,921 )

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Net deferred tax assets (liabilities) $ ( 153,741 ) $ ( 71,172 )

The company has recorded tax reserves on undistributed foreign earnings not permanently reinvested of $ 7.5 million and $ 5.6 million at January 2, 2021 and December 28, 2019, respectively.

The company has recorded tax reserves on undistributed foreign earnings not permanently reinvested of $ 9.7 million and $ 7.5 million at January 1, 2022 and January 2, 2021, respectively.

No further provisions were made for income taxes that may result from future remittances of undistributed earnings of foreign subsidiaries that are determined to be permanently reinvested, which were $ 538.0 million on January 1, 2022.

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In the opinion of management, adequate tax provisions have been made for the years subject to examination.

The following table summarizes the activity related to the unrecognized tax benefits for the fiscal years ended December 29, 2018, December 28, 2019 and January 2, 2021 (in thousands):

The following table summarizes the activity related to the unrecognized tax benefits for the fiscal years ended December 28, 2019, January 2, 2021 and January 1, 2022 (in thousands):

Balance at December 28, 2019 $ 31,559

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Increase to prior year tax positions 183

Decrease to prior year tax positions ( 53 )

Settlements ( 533 )

Lapse of statute of limitations ( 4,484 )

Balance at December 28, 2019 $ 31,559

Balance at January 2, 2021 $ 30,329

Increases to current year tax positions 1,760

Increase to prior year tax positions 6,796

Settlements and other adjustments ( 586 )

Decrease to prior year tax positions ( 576 )

Settlements ( 1,180 )

Lapse of statute of limitations ( 920 )

Balance at January 2, 2021 $ 30,329

Balance as of January 1, 2022 $ 36,209

It is reasonably possible that the amounts of unrecognized tax benefits associated with state, federal and foreign tax positions may decrease over the next twelve months due to expiration of a statute or completion of an audit.

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The company periodically enters into derivative instruments, principally forward contracts to reduce exposures pertaining to fluctuations in foreign exchange rates.

The fair value of these forward contracts was an unrealized loss of $ 2.2 million at the end of the year.

The notional amount of foreign currency contracts outstanding was $ 350.5 million and $ 155.6 million as of January 1, 2022 and January 2, 2021, respectively.

The fair value of these forward contracts was an unrealized gain of $ 1.1 million at the end of the year.

(b) Interest Rate

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The company has designated these swaps as cash flow hedges and all changes in fair value of the swaps are recognized in accumulated other comprehensive income.

The fair value of these instruments was a liability of $ 51.1 million and a liability of $ 23.3 million as of January 2, 2021 and December 28, 2019, respectively.

The change in fair value of these swap agreements in 2020 was a loss of $ 20.7 million, net of taxes.

The fair value of these instruments was a liability of $ 18.0 million and $ 51.1 million as of January 1, 2022 and January 2, 2021, respectively.

The change in fair value of these swap agreements in 2021 was a gain of $ 24.6 million, net of taxes.

A summary of the company’s interest rate swaps is as follows (in thousands):

Twelve Months Ended

Location Jan 2, 2021 Dec 28, 2019

Location Jan 1, 2022 Jan 2, 2021

Fair value Other assets $ 3,645 $ —

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The company has operating lease costs of $ 31.5 million, $ 30.1 million and $ 30.6 million in fiscal 2021, 2020 and 2019 respectively, including short-term lease expense and variable lease costs, which were immaterial in the year.

Leases (in thousands) January 2, 2021 December 28, 2019

Leases (in thousands) January 1, 2022 January 2, 2021

Operating lease right-of-use assets:

Operating Lease Liability:

Current 22,493 21,827

Non-current 76,529 75,018

$ 93,388 $ 97,193

Operating lease liabilities:

Accrued expenses

22,753 22,493

Other non-current liabilities

74,202 76,529

Total Liability $ 96,955 $ 99,022

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Total $ 96,955

Other Lease Information (in thousands, except lease term and discount rate) Twelve Months Ended January 2, 2021 Twelve Months Ended December 28, 2019

Other Lease Information (in thousands, except lease term and discount rate) Twelve Months Ended January 1, 2022 Twelve Months Ended January 2, 2021

Supplemental cash flow information

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Operating leases 16,353 25,433

January 2, 2021 December 28, 2019

Weighted-average remaining lease terms leases - Operating 6.0 years 6.3 years

January 1, 2022 January 2, 2021

Weighted-average remaining lease terms - Operating 5.6 years 6.0 years

Weighted-average discount rate - Operating 2.8 % 3.0 %

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The Commercial Foodservice Equipment Group manufactures, sells, and distributes foodservice equipment for the restaurant and institutional kitchen industry.

This business segment has manufacturing facilities in Arkansas, California, Colorado, Florida, Illinois, Michigan, New Hampshire, North Carolina, Ohio, Oregon, Pennsylvania, Tennessee, Texas, Vermont, Washington, Australia, Canada, China, Denmark, Estonia, Italy, Mexico, the Philippines, Poland, Spain, Sweden and the United Kingdom.

Principal product lines of this group include conveyor ovens, combi-ovens, convection ovens, baking ovens, proofing ovens, deck ovens, speed cooking ovens, hydrovection ovens, ranges, fryers, rethermalizers, steam cooking equipment, food warming equipment, catering equipment, heated cabinets, charbroilers, ventless cooking systems, kitchen ventilation, induction cooking equipment, countertop cooking equipment, toasters, griddles, charcoal grills, professional mixers, stainless steel fabrication, custom millwork, professional refrigerators, blast chillers, coldrooms, ice machines, freezers, soft serve ice cream equipment, coffee and beverage dispensing equipment, home and professional craft brewing equipment, fry dispensers, bottle filling and canning equipment, and IoT solutions.

These products are sold and marketed under the brand names:

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, Giga, Globe, Goldstein, Holman, Houno, IMC, Induc, Ink Kegs, Inline Filling Systems, Jade, JoeTap, Josper, L2F, Lang, Lincat, MagiKitch’n, Market Forge, Marsal, Meheen, Middleby Marshall, MPC, 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 Food Processing Equipment Group manufactures preparation, cooking, packaging food handling and food safety equipment for the food processing industry.

This business segment has manufacturing operations in Georgia, Illinois, Iowa, North Carolina, Oklahoma, Pennsylvania, Texas, Virginia, Washington, Wisconsin, Denmark, France, Germany, India, Italy, and the United Kingdom.

Principal product lines of this group include batch ovens, baking ovens, proofing ovens, conveyor belt ovens, continuous processing ovens, frying systems and automated thermal processing systems, 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, forming equipment, automated loading and unloading systems, food safety, food handling, freezing, defrosting and packaging equipment.

These products are sold and marketed under the brand names:

Alkar, Armor Inox, Auto-Bake, Baker Thermal Solutions, Burford, Cozzini, CV-Tek, Danfotech, Deutsche Process, Drake, Glimek, Hinds-Bock, Maurer-Atmos, MP Equipment, Pacproinc, RapidPak, Scanico, Spooner Vicars, Stewart Systems, Thurne and Ve.Ma.C.

The Residential Kitchen Equipment Group manufactures, sells and distributes kitchen equipment for the residential market.

This business segment has manufacturing facilities in California, Michigan, Mississippi, Wisconsin, France and the United Kingdom.

Principal product lines of this group are ranges, cookers, stoves, cooktops, microwaves, ovens, refrigerators, dishwashers, undercounter refrigeration, wine cellars, ice machines, ventilation equipment and outdoor equipment.

These products are sold and marketed under the brand names:

AGA, AGA Cookshop, Brava, EVO, La Cornue, Leisure Sinks, Lynx, Marvel, Mercury, Rangemaster, Rayburn, Redfyre, Sedona, Stanley, TurboChef, U-Line and Viking.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

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Net sales $ 2,032,761 $ 480,746 $ 737,285 $ — $ 3,250,792

Operating income (3,4)

Income (loss) from operations (3,4,7)

423,121 94,414 124,701 ( 12,244 ) 629,992

7 unchanged sentences

Net sales $ 1,510,279 $ 437,272 $ 565,706 $ — $ 2,513,257

Operating income (3,4)

Income (loss) from operations (3,7)

239,625 78,008 67,046 ( 60,248 ) 324,431

7 unchanged sentences

Net sales $ 1,984,345 $ 400,951 $ 574,150 $ — $ 2,959,446

Operating income (3)

Income (loss) from operations (3,8)

429,946 68,935 89,312 ( 74,150 ) 514,043

11 unchanged sentences

See note 3(f) and 12 for further details .

(4) Gain on litigation settlement is included in Residential Kitchen and gain on sale of plant is included in Commercial Foodservice.

(5) Includes amortization of deferred financing costs .

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

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

(6) Long-lived assets consist of property, plant and equipment, long-term deferred tax assets and other assets.

(7) Gain on sale of plant is included in Commercial Foodservice and Residential Kitchen for 2021 and Gain on sale of plant is included in Commercial Foodservice for 2020.

(8) Gain on litigation settlement is included in Residential Kitchen.

Geographic Information

26 unchanged sentences

The plan became open to new entrants on a defined contribution basis of pension provision in 2002, but was generally closed to new entrants on this basis during 2014.

In December 2020, it was agreed that the Group Pension Scheme will be closed to future pension accruals effective April 5, 2021 and as a result, a curtailment loss has been recognized in fiscal 2020.

In December 2020, it was agreed that the Group Pension Scheme will be closed to future pension accruals effective April 5, 2021 and as a result, a curtailment loss was recognized in fiscal 2020.

The other, much smaller, defined benefit pension plans operating within the AGA Group cover employees in France and the United Kingdom.

18 unchanged sentences

Member contributions — 81 — 312

Actuarial loss 4,146 186,945 4,173 102,377

Actuarial (gain) loss ( 1,617 ) ( 135,475 ) 4,146 186,945

Net benefit payments ( 1,698 ) ( 65,138 ) ( 1,687 ) ( 62,878 )

20 unchanged sentences

Pre-tax components recognized in other comprehensive income for the period:

Current year actuarial loss $ 4,334 $ 211,494 $ 2,532 $ 69,228

Current year actuarial (gain) loss $ ( 1,887 ) $ ( 181,518 ) $ 4,334 $ 211,494

Actuarial loss recognized ( 1,118 ) ( 12,832 ) ( 763 ) ( 3,841 )

27 unchanged sentences

In accordance with ASU 2015-04, "Practical Expedient for the Measurement Date of an Employer's Defined Benefit Obligation and Plan Assets", the company has elected to measure the pension plan assets and obligations as of the calendar month end closest to the fiscal year end.

The following tables summarize the basis used to measure the pension plans’ assets at fair value as of January 2, 2021and December 28, 2019 (in thousands):

The following tables summarize the basis used to measure the pension plans’ assets at fair value as of January 1, 2022 and January 2, 2021 (in thousands):

Fiscal 2021 Fiscal 2020

89 unchanged sentences

The company also maintained defined contribution plans for its UK based employees.

(12) QUARTERLY DATA (UNAUDITED)

(dollars in thousands, except per share data)

Net sales $ 677,459 $ 471,977 $ 634,525 $ 729,296 $ 2,513,257

Gross profit 250,190 153,126 222,749 255,983 882,048

Income from operations 105,414 39,118 86,672 93,227 324,431

Net earnings $ 73,779 $ 21,162 $ 60,516 $ 51,837 $ 207,294

Basic earnings per share (1) $ 1.33 $ 0.39 $ 1.10 $ 0.94 $ 3.76

Diluted earnings per share (1) $ 1.33 $ 0.39 $ 1.10 $ 0.94 $ 3.76

Net sales $ 686,802 $ 761,004 $ 724,014 $ 787,626 $ 2,959,446

Gross profit 257,312 286,479 270,028 289,678 1,103,497

Income from operations 101,061 139,607 121,345 152,030 514,043

Net earnings $ 69,013 $ 92,210 $ 82,020 $ 108,997 $ 352,240

Basic earnings per share (1) $ 1.24 $ 1.66 $ 1.47 $ 1.96 $ 6.33

Diluted earnings per share (1) $ 1.24 $ 1.66 $ 1.47 $ 1.96 $ 6.33

(1) Sum of quarters may not equal the total for the year due to changes in the number of shares outstanding during the year.

(12) RESTRUCTURING AND ACQUISITION INTEGRATION INITIATIVES

1 unchanged sentence

During the fiscal years 2021, 2020 and 2019, the company undertook cost reduction initiatives related to the Commercial Foodservice Equipment Group including headcount reductions and facility consolidations.

These actions resulted in expenses of $ 10.1 million, $ 6.4 million and $ 3.5 million in the twelve months ended January 2, 2021, December 28, 2019 and December 29, 2018 respectively, primarily for severance related to headcount reductions and facility consolidations.

These actions resulted in expenses of $ 5.4 million, $ 10.1 million and $ 6.4 million in the twelve months ended January 1, 2022, January 2, 2021 and December 28, 2019 respectively, primarily for severance related to headcount reductions associated with COVID-19 pandemic and facility consolidations.

These expenses are reflected in restructuring expenses in the Consolidated Statements of Earnings.

The realization of cost savings from the restructuring initiatives began in 2020 with an expected annual savings of approximately $ 20.0 million.

At January 2, 2021, the restructuring obligations accrued for these initiatives are immaterial and will be substantially complete by the end of fiscal year year 2021.

Residential Kitchen Equipment Group:

During the fiscal years 2020, 2019 and 2018, the company has completed various restructuring initiatives for the AGA Group, including headcount reductions and consolidation and disposition of certain facilities and business operations.

During 2018, the company undertook restructuring efforts related to Grange, a non-core business within the AGA Group, and elected to cease its operations.

During fiscal 2019 and 2020, the initiatives within the AGA Group were primarily related to headcount reductions.

The company recorded expense of $ 1.6 million, $ 2.3 million and $ 15.1 million, respectively in the years ended January 2, 2021, December 28, 2019 and December 29, 2018, respectively.

Additionally within the Residential Kitchen Equipment Group, the company incurred restructuring costs, primarily for severance related to headcount reductions and facility consolidations.

The company recorded expense of $ 0.2 million and $ 1.7 million, respectively in the years ended January 2, 2021 and December 28, 2019, respectively.

These expenses are reflected in restructuring expenses in the Consolidated Statements of Earnings and no material future expenses associated with these actions are anticipated.

The restructuring obligations accrued for these initiatives are immaterial and will be substantially complete by the end of fiscal year 2021.

The costs and corresponding reserve balances for restructuring within the Residential Kitchen Equipment Group are summarized as follows (in thousands):

Severance/Benefits Facilities/Operations Other Total

Balance as of December 30, 2017 $ 3,698 $ 1,467 $ 157 $ 5,322

Expenses 6,367 3,771 5,001 15,139

Exchange Effect ( 49 ) ( 11 ) 23 ( 37 )

Payments ( 9,150 ) ( 5,171 ) ( 4,394 ) ( 18,715 )

Balance as of December 29, 2018 $ 866 $ 56 $ 787 $ 1,709

Expenses 3,766 684 ( 476 ) 3,974

Exchange Effect 24 ( 7 ) ( 55 ) ( 38 )

Payments/Utilization ( 3,990 ) ( 632 ) ( 256 ) ( 4,878 )

Balance as of December 28, 2019 $ 666 $ 101 $ — $ 767

Expenses 899 907 — 1,806

Exchange Effect — 26 — 26

Payments/Utilization ( 1,368 ) ( 922 ) — ( 2,290 )

Balance as of January 2, 2021 $ 197 $ 112 $ — $ 309

The restructuring expenses for the other segment of the company were not material during fiscal years 2020, 2019 and 2018.

The primary realization of cost savings from the restructuring initiatives began in 2020 with an expected annual savings of approximately $ 20.0 million.

At January 1, 2022, the restructuring obligations accrued for these initiatives are immaterial and will be substantially complete by the end of fiscal year 2022.

The restructuring expenses for the other segments of the company were not material during fiscal years 2021, 2020 and 2019.

In December 2020, the company recorded an impairment of approximately $ 2.9 million associated to reflect the fair market value of assets held for sale of a non-core business within the Residential Kitchen Equipment Group.

1 unchanged sentence

As a result approximately $ 17.4 million of current assets have been classified as held for sale, within prepaid expenses and other current assets and approximately $ 22.3 million of liabilities have been classified as held for sale within accrued expenses on the Consolidated Balance Sheets.

The sale was completed in January 2021.

THE MIDDLEBY CORPORATION

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

FOR THE FISCAL YEARS ENDED JANUARY 2, 2021, DECEMBER 28, 2019

FOR THE FISCAL YEARS ENDED JANUARY 1, 2022, JANUARY 2, 2021

AND December 28, 2019

18 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data