What changed in this filing

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Item 1A. Risk Factors

2024-02-28 compared with 2023-03-01 · 28 added, 33 removed, 268 unchanged (19% of the section changed)

3 unchanged sentences

Economic Risks

Current and future economic conditions could adversely affect the company’s business and financial performance.

Current and future economic conditions could materially adversely affect the company’s business and financial performance.

The company’s operating results are impacted by the health of the North American, European, Asian and Latin American economies.

The company’s business and financial performance, including collection of its accounts receivable, may be adversely affected by current and future economic conditions that may cause a decline in business and consumer spending, a reduction in the availability of credit and decreased growth of its existing customers, resulting in customers electing to delay the replacement of aging equipment.

Higher energy costs, rising interest rates, weakness in the residential construction, housing and home improvement markets, financial market volatility, inflation, recession, global hostilities and acts of terrorism may also adversely affect the company’s business and financial performance.

The company’s business and financial performance, including collection of its accounts receivable, may be materially adversely affected by current and future economic conditions that may cause a decline in business and consumer spending, a reduction in the availability of credit and decreased growth of its existing customers, resulting in customers electing to delay the replacement of aging equipment.

Higher energy costs, fluctuating interest rates, weakness in the residential construction, housing and home improvement markets, financial market volatility, inflation, recession, global hostilities and acts of terrorism have and may in the future also adversely affect the company’s business and financial performance.

Additionally, the company may experience difficulties in scaling its operations due to economic pressures in the U.S.

10 unchanged sentences

Business and Operational Risks

The COVID-19 pandemic has adversely impacted, and likely will continue to, adversely impact and pose risks to the company, the nature and extent of which are highly uncertain and unpredictable.

The company is monitoring the global outbreak of the COVID-19 pandemic and taking steps to mitigate the risks posed by its spread, including working with its customers, employees, suppliers and other stakeholders.

The pandemic has adversely affected, the company's financial results, condition and outlook.

Certain elements of the company's business (including its supply chain, distribution systems, production levels and research and development activities) and operations have been negatively impacted due to significant portions of the company's workforce being unable to work effectively due to quarantines, government orders and guidance, facility closures, illness, travel restrictions, implementation of precautionary measures and other restrictions.

The company also has experienced, and expects to continue to experience, volatility in demand given disruptions in global health, economic and market conditions, consumer behavior and global restaurant operations.

If the pandemic continues and conditions worsen, the company expects to experience additional adverse impacts on operational and commercial activities, costs, customer orders and purchases and collections of accounts receivable, which may be material, and the extent of these exposures remains uncertain even if conditions begin to improve.

The pandemic has also increased the risk related to the company's ability to ensure business continuity during a potential disruption, including increased cybersecurity attacks related to the work-from-home environment.

Furthermore, the pandemic has impacted and may further impact the broader economies of affected countries, including adversely impacting economic growth, the proper functioning of financial and capital markets, foreign currency exchange rates, inflation and interest rates, all of which could continue to negatively impact the company.

Due to the global breadth of the pandemic's spread and the range of governmental and community reactions, there is uncertainty around the pandemic's ultimate impact and the timing of recovery.

The lingering effects of the pandemic could lead to an extended disruption of economic activity and the impact on the company's consolidated results of operations, financial position and cash flows could be material.

In addition, the continuation or a resurgence of the pandemic could exacerbate the other risk factors.

The company’s level of indebtedness could adversely affect its business, results of operations and growth strategy.

46 unchanged sentences

The company's profitability has been and may continue to be adversely affected during any periods of unexpected or rapid increases in interest rates.

The company maintains a revolving credit facility, which, at December 31, 2022, bore interest at 1.625% above LIBOR per annum.

The company maintains a revolving credit facility, which, at December 30, 2023, bore interest at 1.625% above Secured Overnight Financing Rate ("SOFR") plus a spread adjustment of 0.10% per annum.

A significant increase in any of the forgoing rates would significantly increase the company's cost of borrowings, reduce the availability and increase the cost of obtaining new debt and refinancing existing indebtedness and/or negatively impact the market price of the company's common stock.

22 unchanged sentences

Although the company believes that the performance and price characteristics of its products will provide competitive solutions for its customers’ needs, there can be no assurance that the company’s customers will continue to choose the company’s products over products offered by its competitors.

Further, the markets for the company’s products are characterized by changing technology and evolving industry standards.

The company’s ability to compete successfully will depend, in large part, on its ability to enhance and improve its existing products, to continue to bring innovative products to market in a timely fashion, to adapt the company’s products to the needs and standards of its current and potential customers and to continue to improve operating efficiencies and lower manufacturing costs.

Further, the markets for the company’s products are characterized by changing technology and evolving industry standards, including a focus on developing and manufacturing energy efficient products in a sustainable way.

The company’s ability to compete successfully will depend, in large part, on its ability to enhance and improve its existing products, including its energy efficient products and products manufactured through a process designed to reduce emissions, to continue to bring innovative products to market in a timely fashion, to adapt the company’s products to the needs and standards of its current and potential customers and to continue to improve operating efficiencies and lower manufacturing costs.

Moreover, competitors may develop technologies or products that render the company’s products obsolete or less marketable.

22 unchanged sentences

The company uses large amounts of stainless steel, aluminized steel and other commodities in the manufacture of its products.

A significant increase in the price of steel or any other commodity, due to tariffs or otherwise, would adversely affect the company’s operating results.

In addition, we have experienced disruptions to parts of our supply chain as a result of COVID-19.

Unanticipated delays in delivery of raw materials and component inventories by suppliers—including delays due to capacity constraints, labor disputes, impaired financial condition of suppliers, natural disasters, extreme weather patterns and climate change, pandemics or other events outside our control— may increase the company's production costs, cause delays in the shipment of products or impair the ability of the company to satisfy customer demand.

A significant increase in the price of steel or any other commodity, due to tariffs or otherwise, has and may continue to adversely affect the company’s operating results.

In addition, we have experienced and continue to experience disruptions to parts of our supply chain.

Unanticipated delays in delivery of raw materials and component inventories by suppliers—including delays due to capacity constraints, labor disputes, impaired financial condition of suppliers, natural disasters, extreme weather patterns and climate change, pandemics or other events outside our control— have and may continue to increase the company's production costs, cause delays in the shipment of products or impair the ability of the company to satisfy customer demand.

An interruption in or the cessation of an important supply by any third party and the company’s inability to make alternative arrangements in a timely manner, or at all, could have a material adverse effect on the company’s business, financial condition and operating results.

The company faces risks related to health epidemics and other widespread outbreaks of contagious disease, which could significantly disrupt its operations and impact its operating results.

The spread of COVID-19 and other contagious diseases, or other adverse public health developments, has had a material and adverse effect on our business operations.

These effects have included and could continue to include disruptions or restrictions on our ability to travel, as well as temporary closures of our facilities or the facilities of our suppliers or customers.

Any disruption of our suppliers' or customers' businesses would likely impact our sales and operating results.

The spread of contagious diseases or other adverse public health developments, has had a material and adverse effect on our business operations.

These effects have included and may in the future include disruptions or restrictions on our ability to travel, temporary closures of our or our customers' facilities and disruptions to our supply chain.

Any disruption of our, our suppliers' or our customers' businesses due to adverse public health developments could have a material impact on our sales and operating results.

The company may be the subject of product liability claims or product recalls, and it may be unable to obtain or maintain insurance adequate to cover potential liabilities.

57 unchanged sentences

• withdrawal from or renegotiation of international trade agreements and other restrictions on trade between the United States and China, the European Union, Canada, Mexico and other countries;

• effects of the United Kingdom's decision to exit the European Union and related potential disruption to trade;

• uncertain impact on operations, suppliers and customers related to business disruptions and restrictions due to the COVID-19 pandemic;

• uncertain impact on operations, suppliers and customers related to business disruptions in international jurisdictions;

• reduced protection for intellectual property rights;

24 unchanged sentences

Elgin, Illinois;

Easton, Pennsylvania and Lodi, Wisconsin that extend through December 2023, December 2026, July 2025, May 2023 and December 2024, respectively.

Easton, Pennsylvania and Lodi, Wisconsin that extend through February 2027, December 2026, July 2025, June 2027 and December 2024, respectively.

The company also has a union workforce at its manufacturing facility in the Philippines under a contract that extends through June 2026.

26 unchanged sentences

The company depends on information technology as an enabler to improve the effectiveness of its operations and to interface with its customers, as well as to maintain financial accuracy and efficiency.

Information technology system failures, including suppliers’ or vendors’ system failures, could disrupt the company’s operations by causing transaction errors, processing inefficiencies, delays or cancellation of customer orders, the loss of customers, impediments to the manufacture or shipment of products, other business disruptions, or the loss of or damage to intellectual property through a security breach.

Information technology system failures, including suppliers’ or vendors’ system failures, have and could in the future disrupt the company’s operations by causing transaction errors, processing inefficiencies, delays or cancellation of customer orders, the loss of customers, impediments to the manufacture or shipment of products, other business disruptions, or the loss of or damage to intellectual property through a security breach.

The company’s information systems, or those of its third-party service providers, could also be penetrated by outside parties intent on extracting information, corrupting information or disrupting business processes.

Such unauthorized access could disrupt the company’s business, increase costs and/or result in the loss of assets.

Such unauthorized access could materially disrupt the company’s business, increase costs and/or result in the loss of assets.

Cybersecurity attacks are becoming more sophisticated and include, but are not limited to, malicious software, attempts to gain unauthorized access to data, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information, corruption or destruction of data and other manipulation or improper use of systems or networks.

1 unchanged sentence

In addition, as security threats and cybersecurity and data privacy and protection laws and regulations, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personally identifiable information, continue to evolve and become more sophisticated, we may invest additional resources in the security of our systems.

Any such increased level of investment could adversely affect our financial condition or results of operations.

Further, as governmental authorities around the world continue to consider legislative and regulatory proposals concerning data protection, we may face substantial penalties if we fail to comply with regulations and laws regarding data protection.

Any such increased investment could materially increase our costs and adversely affect our financial condition or results of operations.

Further, as governmental authorities around the world continue to consider legislative and regulatory proposals concerning data protection in addition to those already in place, we are and may continue to be subject to substantial penalties if we fail to comply with data protection laws and regulations.

Tax, Legal and Regulatory Risks

17 unchanged sentences

Environmental laws and regulations are constantly evolving, and it is impossible to accurately predict the effect they may have upon the financial condition, results of operations, or cash flows of the company.

We are subject to risks associated with possible climate change legislation, regulation and international accords.

We are subject to risks associated with climate change legislation, regulation and international accords.

In addition, failure to achieve or demonstrate progress towards our climate goals may expose us to liability and reputational harm.

Government mandates, standards or regulations intended to reduce greenhouse gas emissions or projected climate change impacts have resulted in, and are likely to continue resulting in, increased energy, manufacturing, transportation and raw material costs.

Governmental requirements directed at regulating greenhouse gas emissions could cause us to incur expenses that we cannot recover or that will require us to increase the price of products we sell, which could impact the demand for those products.

Additionally, as discussed further in our 2023 Sustainability Report, accessible at www.middleby.com/sustainability, we have made commitments to reduce the environmental impact of our operations and provide sustainable solutions to our customers, including setting targets for reducing our Greenhouse Gas (“GHG”) emission and consumption of non-renewable resources.

There can be no assurance that we will achieve our climate-related goals on the timeline anticipated or at all.

Further, future events or circumstances could lead us to prioritize other business interests over progressing toward our current climate goals due to factors such as business strategy, economic conditions, regulatory changes or pressure from stakeholders.

If we fail or are perceived to fail to progress toward achieving our climate-related goals and commitments or if our investors, customers or other stakeholders become dissatisfied with the level of GHG emissions produced by our production process or our products, we could face adverse publicity, which could have a material adverse impact on our business, financial condition and results of operations

Unfavorable tax law changes and tax authority rulings may adversely affect financial results.

4 unchanged sentences

If these audits result in assessments different from amounts recorded, future financial results may include unfavorable tax adjustments.

In December 2021, The Organisation for Economic Co-operation and Development ("OECD") issued Pillar II model rules which would establish a global per-country minimum tax of 15%.

The directive requires the rules to initially become effective for fiscal years starting on or after December 31, 2023.

While it is uncertain whether the United States will enact legislation to adopt Pillar II, numerous countries have enacted legislation, or have indicated their intent to adopt legislation, to implement certain aspects of Pillar II effective January 1, 2024, and the remaining global minimum tax rules by January 1, 2025.

The OECD and implementing countries are expected to continue to make further revisions to their legislation and release additional guidance.

The trading price of the company's common stock has been volatile, and investors in the company's common stock may experience substantial losses.

7 unchanged sentences

• other economic or external factors.

Unresolved Staff Comments

Not applicable.

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 1A. Risk Factors