MIDDLEBY Corp 10-K

Item 8. Financial Statements and Supplementary Data Page Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 44 Consolidated Balance Sheets 47 Consolidated Statements of Earnings 48 Consolidated Statements of Comprehensive Income 49 Consolidated Statements of Changes in Stockholders’ Equity 50 Consolidated Statements of Cash Flows 51 Notes to Consolidated Financial Statements 52 The following consolidated financial statement schedule is included in response to Item 15 Schedule II - Valuation and Qualifying Accounts and Reserves 87 All other schedules for which provision is made to applicable regulation of the Securities and Exchange Commission are not required under the related instruction or are inapplicable and, therefore, have been omitted. 43 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of The Middleby Corporation Opinion on Internal Control over Financial Reporting We have audited The Middleby Corporation’s internal control over financial reporting as of December 28, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework), (the COSO criteria). In our opinion, The Middleby Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 28, 2024, 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 GBT GmbH Bakery, MaxMac, Emery Thompson, JC Ford and Gorreri which are included in the 2024 consolidated financial statements of the Company and constituted 2.5% and 0.0% of total and net assets, respectively, as of December 28, 2024 and 0.6% and (0.1)% 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 GBT GmbH Bakery, MaxMac, Emery Thompson, JC Ford and Gorreri. 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 December 28, 2024 and December 30, 2023, 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 December 28, 2024, and the related notes and financial statement schedule listed in the Index at Item 8 and our report dated February 26, 2025 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 Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Chicago, Illinois February 26, 2025 44 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of The Middleby Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of The Middleby Corporation (the Company) as of December 28, 2024, and December 30, 2023, 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 December 28, 2024, 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 December 28, 2024 and December 30, 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 28, 2024, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 28, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 26, 2025, expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (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 a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 45 Goodwill Impairment Assessment Description of the Matter At December 28, 2024, the Company had goodwill of $2.5 billion on its consolidated balance sheet. As discussed in Note 3 to the consolidated financial statements, goodwill is assessed for impairment on an annual basis or more frequently if indicators of potential impairment exist. If the fair value of the reporting units (for goodwill) is less than its respective carrying value, an impairment loss is recognized in an amount equal to the difference. Auditing the Company’s quantitative goodwill impairment assessment is complex because the estimation of fair values involves subjective management assumptions. These assumptions for the goodwill assessment include the net sales growth, EBITDA margin and discount rate. These significant assumptions used in the Company’s valuation model are forward looking and changes in these assumptions can have a material effect on the determination of fair values. 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 its impairment assessment for the Residential Kitchen reporting unit, including management’s review of the methods and significant assumptions described above. Our audit procedures to test the annual impairment assessment for the Residential Kitchen reporting unit included, among others, assessing the assumptions described above, and the underlying data used to support such assumptions. For example, we compared certain assumptions to industry, market and economic trends. Where appropriate, we evaluated whether changes to the Company’s business and other factors would affect the assumption. We also assessed the historical accuracy of management’s estimates and performed sensitivity analyses. We involved our valuation specialists to assist with our evaluation of the methodology and auditing certain significant assumptions included in the fair value estimates. /s/ Ernst & Young LLP We have served as the Company's auditor since 2012. Chicago, Illinois February 26, 2025 46 THE MIDDLEBY CORPORATION CONSOLIDATED BALANCE SHEETS DECEMBER 28, 2024 AND DECEMBER 30, 2023 (amounts in thousands, except share data) ASSETS Dec 28, 2024 Dec 30, 2023 Current assets: Cash and cash equivalents $ 689,533 $ 247,496 Accounts receivable, net of reserve for doubtful accounts of $ 24,597 and $ 23,464 643,355 644,576 Inventories, net 841,567 935,867 Prepaid expenses and other 131,566 112,690 Prepaid taxes 24,022 25,230 Total current assets 2,330,043 1,965,859 Property, plant and equipment, net of accumulated depreciation of $ 377,408 and $ 339,528 525,965 510,898 Goodwill 2,518,222 2,486,310 Other intangibles, net of amortization of $ 633,842 and $ 574,079 1,611,037 1,693,076 Long-term deferred tax assets 6,281 7,945 Pension benefits assets 91,207 38,535 Other assets 200,396 204,069 Total assets $ 7,283,151 $ 6,906,692 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 43,949 $ 44,822 Accounts payable 208,908 227,080 Accrued expenses 576,465 579,192 Total current liabilities 829,322 851,094 Long-term debt 2,351,118 2,380,373 Long-term deferred tax liability 252,062 216,143 Accrued pension benefits 9,573 12,128 Other non-current liabilities 202,645 197,065 Stockholders' equity: Preferred stock, $ 0.01 par value; nonvoting; 2,000,000 shares authorized; none issued — — Common stock, $ 0.01 par value; 64,264,828 and 63,942,340 shares issued in 2024 and 2023, respectively 148 148 Paid-in capital 520,177 479,216 Treasury stock, at cost; 10,574,619 and 10,338,922 shares in 2024 and 2023, respectively ( 940,691 ) ( 906,031 ) Retained earnings 4,328,187 3,899,754 Accumulated other comprehensive loss ( 269,390 ) ( 223,198 ) Total stockholders' equity 3,638,431 3,249,889 Total liabilities and stockholders' equity $ 7,283,151 $ 6,906,692 The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. 47 THE MIDDLEBY CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS FOR THE FISCAL YEARS ENDED DECEMBER 28, 2024, DECEMBER 30, 2023 AND DECEMBER 31, 2022 (amounts in thousands, except per share data) 2024 2023 2022 Net sales $ 3,875,162 $ 4,036,605 $ 4,032,853 Cost of sales 2,404,793 2,502,543 2,586,299 Gross profit 1,470,369 1,534,062 1,446,554 Selling, general, and administrative expenses 762,502 806,946 797,234 Restructuring expenses 14,181 14,134 9,716 Impairments 38,637 78,114 — Gain on sale of plant ( 1,139 ) — — Income from operations 656,188 634,868 639,604 Interest expense and deferred financing amortization, net 92,229 120,348 88,977 Net periodic pension benefit (other than service cost & curtailment) ( 14,897 ) ( 9,071 ) ( 42,681 ) Other expense, net 1,536 4,213 28,893 Earnings before income taxes 577,320 519,378 564,415 Provision for income taxes 148,887 118,496 127,846 Net earnings $ 428,433 $ 400,882 $ 436,569 Net earnings per share: Basic $ 7.97 $ 7.48 $ 8.07 Diluted $ 7.90 $ 7.41 $ 7.95 Weighted average number of shares Basic 53,738 53,577 54,095 Dilutive common stock equivalents 471 509 852 Diluted 54,209 54,086 54,947 The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. 48 THE MIDDLEBY CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE FISCAL YEARS ENDED DECEMBER 28, 2024, DECEMBER 30, 2023 AND DECEMBER 31, 2022 (amounts in thousands) 2024 2023 2022 Net earnings $ 428,433 $ 400,882 $ 436,569 Other comprehensive (loss) income: Foreign currency translation adjustments ( 67,765 ) 59,855 ( 107,691 ) Pension liability adjustment, net of tax 31,179 11,988 127,995 Unrealized (loss) gain on interest rate swaps, net of tax ( 9,606 ) ( 16,569 ) 61,638 Unrealized loss on certain investments, net of tax — — ( 1,330 ) Other comprehensive (loss) income: $ ( 46,192 ) $ 55,274 $ 80,612 Comprehensive income $ 382,241 $ 456,156 $ 517,181 The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. 49 THE MIDDLEBY CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE FISCAL YEARS ENDED DECEMBER 28, 2024, DECEMBER 30, 2023 AND DECEMBER 31, 2022 (amounts in thousands) Common Stock Paid-in Capital Treasury Stock Retained Earnings Accumulated Other Comprehensive Income/(loss) Total Stockholders' Equity Balance, January 1, 2022 $ 147 $ 357,309 $ ( 566,399 ) $ 3,062,303 $ ( 359,084 ) $ 2,494,276 Net earnings — — — 436,569 — 436,569 Currency translation adjustments — — — — ( 107,691 ) ( 107,691 ) Change in unrecognized pension benefit costs, net of tax of $ 37,475 — — — — 127,995 127,995 Unrealized gain on interest rate swap, net of tax of $ 21,337 — — — — 61,638 61,638 Unrealized loss on certain investments, net of tax of $( 443 ) — — — — ( 1,330 ) ( 1,330 ) Stock compensation — 58,368 — — — 58,368 Purchase of treasury stock — — ( 264,777 ) — — ( 264,777 ) Purchase of capped calls, net of tax of $( 2,354 ) — ( 7,301 ) — — — ( 7,301 ) Balance, December 31, 2022 $ 147 $ 408,376 $ ( 831,176 ) $ 3,498,872 $ ( 278,472 ) $ 2,797,747 Net earnings — — — 400,882 — 400,882 Currency translation adjustments — — — — 59,855 59,855 Change in unrecognized pension benefit costs, net of tax of $ 5,993 — — — — 11,988 11,988 Unrealized gain on interest rate swap, net of tax of $( 5,637 ) — — — — ( 16,569 ) ( 16,569 ) Stock compensation — 51,047 — — — 51,047 Stock issuance 1 19,793 — — — 19,794 Purchase of treasury stock — — ( 74,855 ) — — ( 74,855 ) Balance, December 30, 2023 $ 148 $ 479,216 $ ( 906,031 ) $ 3,899,754 $ ( 223,198 ) $ 3,249,889 Net earnings — — — 428,433 — 428,433 Currency translation adjustments — — — — ( 67,765 ) ( 67,765 ) Change in unrecognized pension benefit costs, net of tax of $ 9,868 — — — — 31,179 31,179 Unrealized gain on interest rate swap, net of tax of $( 3,221 ) — — — — ( 9,606 ) ( 9,606 ) Stock compensation — 36,151 — — — 36,151 Stock issuance — 4,810 — — — 4,810 Purchase of treasury stock — — ( 34,660 ) — — ( 34,660 ) Balance, December 28, 2024 $ 148 $ 520,177 $ ( 940,691 ) $ 4,328,187 $ ( 269,390 ) $ 3,638,431 The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. 50 THE MIDDLEBY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE FISCAL YEARS ENDED DECEMBER 28, 2024, DECEMBER 30, 2023 AND DECEMBER 31, 2022 (amounts in thousands) 2024 2023 2022 Cash flows from operating activities— Net earnings $ 428,433 $ 400,882 $ 436,569 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation and amortization 127,174 132,604 138,061 Non-cash share-based compensation 36,151 51,047 58,368 Deferred income taxes 35,877 ( 2,405 ) ( 6,642 ) Net periodic pension benefit (other than service costs) ( 14,897 ) ( 9,071 ) ( 42,681 ) Gain on sale of plant ( 1,139 ) — — Impairments 38,637 78,114 — Other non-cash items 645 1,529 ( 12,127 ) Changes in assets and liabilities, net of acquisitions Accounts receivable, net 11,976 ( 4,624 ) ( 28,392 ) Inventories, net 95,407 157,868 ( 196,313 ) Prepaid expenses and other assets ( 45,462 ) ( 17,081 ) ( 5,201 ) Accounts payable ( 21,935 ) ( 49,369 ) ( 47,742 ) Accrued expenses and other liabilities ( 4,051 ) ( 110,704 ) 38,652 Net cash provided by operating activities 686,816 628,790 332,552 Cash flows from investing activities— Net additions to property, plant and equipment ( 49,310 ) ( 85,179 ) ( 67,289 ) Proceeds from sale of property, plant and equipment 2,507 — — Purchase of intangible assets ( 80 ) ( 1,805 ) ( 2,233 ) Acquisitions, net of cash acquired ( 111,652 ) ( 68,758 ) ( 278,797 ) Net cash used in investing activities ( 158,535 ) ( 155,742 ) ( 348,319 ) Cash flows from financing activities— Proceeds under Credit Facility — 640,200 1,870,000 Repayments under Credit Facility ( 32,813 ) ( 948,496 ) ( 1,555,250 ) Premiums paid for capped call — — ( 9,655 ) Net repayments under foreign bank loan ( 2,193 ) ( 166 ) ( 24,470 ) Payments of deferred purchase price ( 3,878 ) ( 7,701 ) ( 7,930 ) Repurchase of treasury stock ( 34,660 ) ( 74,565 ) ( 264,777 ) Other, net ( 224 ) ( 211 ) ( 287 ) Net cash (used in) provided by financing activities ( 73,768 ) ( 390,939 ) 7,631 Effect of exchange rates on cash and cash equivalents ( 12,476 ) 3,386 ( 10,225 ) Changes in cash and cash equivalents— Net increase (decrease) in cash and cash equivalents 442,037 85,495 ( 18,361 ) Cash and cash equivalents at beginning of year 247,496 162,001 180,362 Cash and cash equivalents at end of year $ 689,533 $ 247,496 $ 162,001 Non-cash investing and financing activities: Stock issuance related to acquisition and purchase of intangible assets 4,810 19,794 — The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. 51 THE MIDDLEBY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED DECEMBER 28, 2024, DECEMBER 30, 2023 AND DECEMBER 31, 2022 (1) NATURE OF OPERATIONS 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-four U.S. and thirty-eight international manufacturing facilities. The company operates in three business segments: 1) the Commercial Foodservice Equipment Group, 2) the Food Processing Equipment Group and 3) the Residential Kitchen Equipment Group. The Commercial Foodservice Equipment Group has a broad portfolio of foodservice equipment, which enable it to serve virtually any cooking, warming, refrigeration, freezing and beverage application within a commercial kitchen or foodservice operation. This equipment is used across all types of foodservice operations, including quick-service restaurants, full-service restaurants, convenience stores, retail outlets, hotels and other institutions. The products offered by this group include conveyor ovens, combi-ovens, convection ovens, baking ovens, proofing ovens, deck ovens, high-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, frozen dessert equipment, soft serve ice cream equipment, coffee and beverage dispensing equipment, home and professional craft brewing equipment, fry dispensers, bottle filling and canning equipment, IoT solutions and controls development and manufacturing. The Food Processing Equipment Group offers a broad portfolio of processing solutions for customers producing pre-cooked meat products, such as hot dogs, dinner sausages, poultry and lunchmeats and baked goods such as muffins, cookies and bread. Through its broad line of products, the company is able to deliver a wide array of cooking solutions to service a variety of food processing requirements demanded by its customers. The company can offer highly integrated solutions that provide a food processing operation a uniquely integrated solution providing for the highest level of food quality, product consistency, and reduced operating costs resulting from increased product yields, increased capacity and greater throughput and reduced labor costs through automation. The products offered by this group include a wide array of cooking and baking solutions, including batch ovens, baking ovens, proofing ovens, conveyor belt ovens, continuous processing ovens, frying systems and automated thermal processing systems. The company also provides a comprehensive portfolio of complementary food preparation equipment such as tumblers, massagers, grinders, slicers, reduction and emulsion systems, mixers, blenders, battering equipment, breading equipment, seeding equipment, water cutting systems, food presses, food suspension equipment, filling and depositing solutions, and forming equipment, as well as a variety of automated loading and unloading systems, automated washing systems, auto-guided vehicles, food safety, food handling, freezing, defrosting and packaging equipment. This portfolio of equipment can be integrated to provide customers a highly efficient and customized solution. The Residential Kitchen Equipment Group has a broad portfolio of innovative and professional-style residential kitchen equipment. The products offered by this group include ranges, cookers, stoves, cooktops, microwaves, ovens, refrigerators, dishwashers, undercounter refrigeration, wine cellars, ice machines, beer dispensers, ventilation equipment, mixers, rotisseries and outdoor cooking equipment. 52 (2) ACQUISITIONS AND PURCHASE ACCOUNTING The following represents summarized information on the company's acquisitions in 2023 and 2024 that were not individually material. 2023 Acquisitions During 2023, the company completed various acquisitions that were not individually material. The final allocation of consideration paid for the 2023 acquisitions is summarized as follows (in thousands): Preliminary Opening Balance Sheet Measurement Period Adjustments Adjusted Opening Balance Sheet Cash $ 3,102 $ — $ 3,102 Current assets 9,964 11 9,975 Property, plant and equipment 21,954 ( 214 ) 21,740 Goodwill 38,422 3,278 41,700 Other intangibles 34,337 ( 722 ) 33,615 Other assets — 5 5 Current liabilities ( 3,774 ) ( 1,147 ) ( 4,921 ) Long-term deferred tax liability ( 958 ) 23 ( 935 ) Other non-current liabilities ( 12,099 ) ( 216 ) ( 12,315 ) Consideration paid at closing $ 90,948 $ 1,018 $ 91,966 Contingent consideration 14,743 216 14,959 Net assets acquired and liabilities assumed $ 105,691 $ 1,234 $ 106,925 The net long-term deferred tax liability amounted to $ 0.9 million. The net deferred tax liability is comprised of $ 0.3 million related to the difference between the book and tax basis of identifiable intangible assets and $ 0.6 million related to the difference between the book and tax basis on identifiable tangible asset and liability accounts. The goodwill and $ 17.9 million of other intangibles associated with the trade names are subject to the non-amortization provisions of ASC 350. Other intangibles also include $ 7.2 million allocated to customer relationships, $ 7.9 million allocated to developed technology, and $ 0.6 million allocated to backlog, which are being amortized over periods of 7 years, 7 to 12 years, and 9 months, respectively. Goodwill of $ 18.0 million and other intangibles of $ 7.8 million are allocated to the Food Processing Equipment Group for segment reporting purposes. Goodwill of $ 9.9 million and other intangibles of $ 14.1 million are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. Goodwill of $ 13.8 million and other intangibles of $ 11.7 million are allocated to the Residential Kitchen Equipment Group for segment reporting purposes. Of these assets, goodwill of $ 40.0 million and intangibles of $ 32.2 million are expected to be deductible for tax purposes. Four purchase agreements include earnout provisions providing for a contingent payment due to the sellers for the achievement of certain targets. Four earnouts are payable to the extent certain sales and EBITDA targets are met with measurement dates ending between 2024 and 2026. One earnout is payable upon the achievement of certain product rollout targets specific to the year of measurement. The contractual obligation associated with the contingent earnout provisions recognized on the acquisition date amounts to $ 15.0 million. 53 2024 Acquisitions During 2024, the company completed various acquisitions that were not individually material. The following estimated fair values of assets acquired and liabilities assumed are based on the information that was available as of the acquisition date for the 2024 acquisitions and are summarized as follows (in thousands): Preliminary Opening Balance Sheet Preliminary Measurement Period Adjustments Adjusted Opening Balance Sheet Cash $ 7,868 $ — $ 7,868 Current assets 41,836 222 42,058 Property, plant and equipment 31,515 ( 84 ) 31,431 Goodwill 61,046 ( 114 ) 60,932 Other intangibles 32,248 — 32,248 Long-term deferred tax asset 9 — 9 Other assets 266 938 1,204 Current portion of long-term debt ( 290 ) — ( 290 ) Current liabilities ( 42,304 ) ( 195 ) ( 42,499 ) Long-term debt ( 369 ) — ( 369 ) Long-term deferred tax liability ( 1,132 ) — ( 1,132 ) Other non-current liabilities ( 10,763 ) ( 767 ) ( 11,530 ) Consideration paid at closing $ 119,930 $ — $ 119,930 Contingent consideration 8,681 — 8,681 Net assets acquired and liabilities assumed $ 128,611 $ — $ 128,611 The net long-term deferred tax liability amounted to $ 1.1 million. The net deferred tax liability is related to the difference between the book and tax basis of identifiable intangible assets. The goodwill and $ 16.7 million of other intangibles associated with the trade names are subject to the non-amortization provisions of ASC 350. Other intangibles also include $ 12.2 million allocated to customer relationships, $ 1.1 million allocated to developed technology, and $ 2.2 million allocated to backlog, which are being amortized over periods of 5 to 7 years, 7 years, and 3 to 6 months respectively. Goodwill of $ 46.7 million and other intangibles of $ 24.0 million are allocated to the Food Processing Equipment Group for segment reporting purposes. Goodwill of $ 14.2 million and other intangibles of $ 8.2 million are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. Of these assets, goodwill of $ 52.6 million and intangibles of $ 28.0 million are expected to be deductible for tax purposes. Two purchase agreements include earnout provisions providing for a contingent payment due to the sellers for the achievement of certain targets. Two earnouts are payable to the extent certain sales and EBITDA targets are met with measurement dates ending between 2026 and 2027. The contractual obligation associated with the contingent earnout provisions recognized on the acquisition date amounts to $ 8.7 million. The company believes that information gathered to date provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but the company is waiting for additional information necessary to finalize those fair values for the acquisitions completed during 2024. Certain intangible assets are preliminarily valued using historical information from the Food Processing Equipment Group and Commercial Foodservice Equipment Group and qualitative assessment of the businesses at acquisition date. Specifically, the company estimated the fair values of the intangible assets based on the percentage of purchase price assigned to similar intangible assets in previous acquisitions. Thus, the provisional measurements of fair values set forth above are subject to change. The company expects to complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date. 54 Pro Forma Financial Information In accordance with ASC 805 Business Combinations, the following unaudited pro forma results of operations for the twelve months ended December 28, 2024 and December 30, 2023, assumes the 2023 and 2024 acquisitions described above were completed on January 1, 2023 (first day of fiscal year 2023). 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 December 28, 2024 December 30, 2023 Net sales $ 3,958,724 $ 4,140,633 Net earnings 435,145 390,254 Net earnings per share: Basic $ 8.10 $ 7.28 Diluted $ 8.03 $ 7.22 The historical consolidated financial information of the company and the acquisitions have been adjusted in the pro forma information to give effect to events that are (1) directly attributable to the transactions, (2) factually supportable and (3) expected to have a continuing impact on the combined results. Pro forma data may not be indicative of the results that would have been obtained had these acquisitions occurred at the beginning of the periods presented, nor is it intended to be a projection of future results. Additionally, the pro forma financial information does not reflect the costs which the company has incurred or may incur to integrate the acquired businesses. (3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Presentation The consolidated financial statements include the accounts of the company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The company's consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses as well as related disclosures. Significant items that are subject to such estimates and judgments include allowances for doubtful accounts, reserves for excess and obsolete inventories, long-lived and intangible assets, warranty reserves, insurance reserves, income tax reserves and post-retirement obligations. On an ongoing basis, the company evaluates its estimates and assumptions based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The company's fiscal year ends on the Saturday nearest December 31. Fiscal years 2024, 2023, and 2022 ended on December 28, 2024, December 30, 2023 and December 31, 2022, respectively, with each year including 52 weeks. (b) Cash and Cash Equivalents The company considers all short-term investments with original maturities of three months or less when acquired to be cash equivalents. The company’s policy is to invest its excess cash in interest-bearing deposits with major banks that are subject to minimal credit and market risk. (c) Accounts Receivable Accounts receivable, as shown in the consolidated balance sheets, were net of allowances for doubtful accounts of $ 24.6 million and $ 23.5 million at December 28, 2024 and December 30, 2023, respectively. At December 28, 2024, all accounts receivable were expected to be collected within one year. 55 (d) Inventories Inventories are composed of material, labor and overhead and are stated at the lower of cost or net realizable value. Costs for inventory have been determined using the first-in, first-out ("FIFO") method. The company estimates reserves for inventory obsolescence and shrinkage based on its judgment of future realization. Inventories at December 28, 2024 and December 30, 2023 are as follows (in thousands): 2024 2023 Raw materials and parts $ 453,273 $ 495,488 Work-in-process 76,601 80,102 Finished goods 311,693 360,277 $ 841,567 $ 935,867 (e) Property, Plant and Equipment Property, plant and equipment are carried at cost as follows (in thousands): 2024 2023 Land $ 74,163 $ 73,060 Building and improvements 372,845 346,527 Furniture and fixtures 69,556 69,438 Machinery and equipment 386,809 361,401 903,373 850,426 Less accumulated depreciation ( 377,408 ) ( 339,528 ) $ 525,965 $ 510,898 Property, plant and equipment are depreciated or amortized on a straight-line basis over their useful lives based on management's estimates of the period over which the assets will be utilized to benefit the operations of the company. The useful lives are estimated based on historical experience with similar assets, taking into account anticipated technological or other changes. The company periodically reviews these lives relative to physical factors, economic factors and industry trends. If there are changes in the planned use of property and equipment or if technological changes were to occur more rapidly than anticipated, the useful lives assigned to these assets may need to be shortened, resulting in the recognition of increased depreciation and amortization expense in future periods. The f ollowing is a summary of the estimated useful lives: Description Life Building and improvements 20 to 40 years Furniture and fixtures 3 to 7 years Machinery and equipment 3 to 10 years Depreciation expense amounted to $ 55.6 million, $ 50.4 million and $ 44.2 million in fiscal 2024, 2023 and 2022, respectively. Expenditures which significantly extend useful lives are capitalized. Maintenance and repairs are charged to expense as incurred. 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. 56 (f) Goodwill and Other Intangibles The company’s business acquisitions result in the recognition of goodwill and other intangible assets, which are a significant portion of the company’s total assets. Goodwill represents the excess of acquisition costs over the fair value of the net tangible assets and identifiable intangible assets acquired in a business combination. Identifiable intangible assets are recognized separately from goodwill and include trademarks and trade names, technology, customer relationships and other specifically identifiable assets. Trademarks and trade names are deemed to be indefinite-lived. 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 of the fiscal year and more frequently if indicators of impairment exist. The goodwill impairment test is performed at the reporting unit level. The company initially performs a qualitative analysis to determine if it is more likely than not that the goodwill balance or indefinite-life intangible asset is impaired. In conducting a qualitative assessment, the company analyzes a variety of events or factors that may influence the fair value of the reporting unit or indefinite-life intangible, including, but not limited to: macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, share price and other relevant factors. If an indicator of impairment is determined from the qualitative analysis, then the company will perform a quantitative analysis. The fair value of each reporting unit is compared to its carrying value. If the fair value of the reporting unit is less than its carrying value, the resulting difference will be a charge to impairment of goodwill in the Consolidated Statements of Earnings in the period in which the determination is made. Fair value is determined using an income approach using a discounted cash flow model. The company performed a qualitative assessment as of September 29, 2024 over all three reporting units. As a result of the financial performance for the Residential Kitchen reporting unit, the company completed a quantitative analysis. The primary indicator of impairment was market conditions resulting in lower than expected revenue performance in the current year and forecasted revenues for future periods. The fair value of the reporting unit exceeded its carrying unit by more than 8% and no impairment of goodwill was recognized. The company believes the assumptions utilized within the quantitative analysis are reasonable and consistent with assumptions that would be used by other marketplace participants. Based on the qualitative assessment for all other reporting units it was determined there was no impairment of goodwill and there are no accumulated impairment losses. Goodwill is allocated to the business segments as follows (in thousands): Commercial Foodservice Food Processing Residential Kitchen Total Balance as of December 31, 2022 $ 1,309,776 $ 350,303 $ 751,755 $ 2,411,834 Goodwill acquired during the year 9,640 17,922 13,586 41,148 Measurement period adjustments to goodwill acquired in prior year 4,825 1,540 — 6,365 Exchange effect 4,815 5,452 16,696 26,963 Balance as of December 30, 2023 $ 1,329,056 $ 375,217 $ 782,037 $ 2,486,310 Goodwill acquired during the year 14,187 46,745 — 60,932 Measurement period adjustments to goodwill acquired in prior year 271 57 224 552 Exchange effect ( 11,683 ) ( 9,604 ) ( 8,285 ) ( 29,572 ) Balance as of December 28, 2024 $ 1,331,831 $ 412,415 $ 773,976 $ 2,518,222 57 Intangible assets consist of the following (in thousands): December 28, 2024 December 30, 2023 Estimated Weighted Avg Remaining Life Gross Carrying Amount Accumulated Amortization Estimated Weighted Avg Remaining Life Gross Carrying Amount Accumulated Amortization Amortized intangible assets: Customer lists 6.4 $ 850,540 $ ( 581,301 ) 7.0 $ 845,326 $ ( 529,533 ) Backlog 0.3 2,192 ( 804 ) 0.0 — — Developed technology 7.4 98,921 ( 51,737 ) 8.3 98,593 ( 44,546 ) $ 951,653 $ ( 633,842 ) $ 943,919 $ ( 574,079 ) Indefinite-lived assets: Trademarks and tradenames $ 1,293,226 $ 1,323,236 The company completed its annual impairment assessment for indefinite-lived intangible assets as of September 29, 2024. We identified indicators of impairment with certain trademarks within each of its reporting units. The primary indicator of impairment was market conditions resulting in lower than expected revenue performance in the current year and forecasted revenues for future periods. Based on the results of the quantitative assessments, the company recorded impairment charges of $ 33.4 million associated with several trademarks, of which $ 28.2 million was associated with the Residential Kitchen Equipment Group and $ 5.2 million with the Commercial Foodservice Equipment Group. The gross value of all trademarks tested was approximately $ 255.8 million, including the impaired trademarks. The fair values of the other trademarks tested with no impairment, per the analyses, exceeded their carrying values by 10% or more. The primary trademark impaired based on the quantitative assessments was within the Residential Kitchen Equipment Group. The fair value of the trademark was estimated to be $ 83.6 million as compared to the carrying value of $ 100.4 million and resulted in a $ 16.8 million indefinite-lived intangible asset impairment charge. The diminution in fair value for the trademark was due to European macroeconomic conditions such as high interest rates, challenging housing market conditions and higher carrying costs of inventory levels in the channel. This led to lower than expected revenue in the current year and corresponding reductions of future revenue due to expectations for recovery in demand. The company estimated the fair value of the trademark using a relief from royalty method under the income approach. In performing the quantitative analyses on this trademark, significant assumptions include revenue growth rates, assumed royalty rates and the discount rate. The company believes the assumptions utilized within the quantitative analysis are reasonable and consistent with assumptions that would be used by other marketplace participants. For the primary trademark impaired, a 10.0% reduction in revenues would result in an impairment charge of approximately $ 7.6 million . A 50 basis point reduction of the royalty rates would result in an impairment charge of approximately $ 5.8 million . A 50 basis point increase in the discount rates would result in an impairment charge of approximately $ 5.5 million . The company performed a qualitative assessment as of September 29, 2024 for all other trademarks and trade names and determined it is more likely than not that the fair value of its other indefinite-life intangible assets are greater than the carrying amounts. The company elected to perform a qualitative assessment on the other indefinite-life intangible assets. We identified indicators of impairment resulting in an impairment charge of approximately $ 5.2 million associated with the decline in recoverable value of an equity method investment. There were no other events that indicated that the fair value was less than the carrying value that would require a quantitative impairment assessment for other indefinite-life intangible assets. 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 global and regional economic market conditions, channel inventory levels, and the underlying demand for its products to assess 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. 58 Definite-lived intangible assets are amortized over their estimated useful lives and tested for impairment 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. The aggregate intangible amortization expense was $ 64.4 million, $ 75.0 million and $ 86.3 million in 2024, 2023 and 2022, respectively. The estimated future amortization expense of intangible assets is as follows (in thousands): 2025 $ 60,165 2026 55,638 2027 47,122 2028 40,829 2029 35,856 Thereafter 78,201 $ 317,811 (g) Accrued Expenses Accrued expenses consist of the following at December 28, 2024 and December 30, 2023, respectively (in thousands): 2024 2023 Contract liabilities $ 120,503 $ 118,681 Accrued payroll and related expenses 107,061 121,514 Accrued warranty 98,306 89,039 Accrued customer rebates 54,558 59,267 Accrued short-term leases 27,938 26,417 Accrued contingent consideration 25,748 17,791 Accrued sales and other tax 20,626 24,568 Accrued agent commission 16,730 16,956 Accrued professional fees 13,973 18,461 Accrued product liability and workers compensation 10,386 11,169 Other accrued expenses 80,636 75,329 $ 576,465 $ 579,192 (h) Litigation Matters From time to time, the company is subject to proceedings, lawsuits and other claims related to products, suppliers, employees, customers and competitors. The company maintains insurance to partially cover product liability, workers compensation, property and casualty, and general liability matters. The company is required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of accrual required, if any, for these contingencies is made after assessment of each matter and the related insurance coverage. The required accrual may change in the future due to new developments or changes in approach such as a change in settlement strategy in dealing with these matters. The company does not believe that any such matter will have a material adverse effect on its financial condition, results of operations or cash flows of the company. 59 (i) Accumulated Other Comprehensive Income (Loss) The following table summarizes the components of accumulated other comprehensive income (loss) as reported in the consolidated balance sheets (in thousands): 2024 2023 Unrecognized pension benefit costs, net of tax of $ 13,866 and $ 3,998 $ ( 78,534 ) $ ( 109,713 ) Unrealized gain on interest rate swap, net of tax of $ 7,978 and $ 11,198 22,399 32,005 Currency translation adjustments ( 213,255 ) ( 145,490 ) $ ( 269,390 ) $ ( 223,198 ) 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 Balance as of December 31, 2022 $ ( 205,345 ) $ ( 121,701 ) $ 48,574 $ ( 278,472 ) Other comprehensive income before reclassification $ 59,855 $ 11,392 $ 15,652 $ 86,899 Amounts reclassified from accumulated other comprehensive income $ — $ 596 $ ( 32,221 ) $ ( 31,625 ) Net current-period other comprehensive income $ 59,855 $ 11,988 $ ( 16,569 ) $ 55,274 Balance as of December 30, 2023 $ ( 145,490 ) $ ( 109,713 ) $ 32,005 $ ( 223,198 ) Other comprehensive income before reclassification ( 67,765 ) 28,585 17,598 ( 21,582 ) Amounts reclassified from accumulated other comprehensive income — 2,594 ( 27,204 ) ( 24,610 ) Net current-period other comprehensive income $ ( 67,765 ) $ 31,179 $ ( 9,606 ) $ ( 46,192 ) Balance as of December 28, 2024 $ ( 213,255 ) $ ( 78,534 ) $ 22,399 $ ( 269,390 ) (1) As of December 28, 2024, pension and unrealized gain on interest rate swap amounts, net of tax, were $ 13.9 million and $ 8.0 million, respectively. During the twelve months ended December 28, 2024, the adjustments to pension and unrealized gain on interest rate swap amounts, net of tax, were $ 9.9 million and $( 3.2 ) million, respectively 60 (j) Fair Value Measures ASC 820 Fair Value Measurements and Disclosures defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into the following levels: Level 1 – Quoted prices in active markets for identical assets or liabilities Level 2 – Inputs, other than quoted prices in active markets, which are observable either directly or indirectly Level 3 – Unobservable inputs based on our own assumptions The company’s financial assets and liabilities that are measured at fair value and are categorized using the fair value hierarchy are as follows (in thousands): Fair Value Level 1 Fair Value Level 2 Fair Value Level 3 Total As of December 28, 2024 Financial Assets: Interest rate swaps $ — $ 29,952 $ — $ 29,952 Financial Liabilities: Contingent consideration $ — $ — $ 53,228 $ 53,228 Foreign exchange derivative contracts $ — $ 1,400 $ — $ 1,400 As of December 30, 2023 Financial Assets: Interest rate swaps $ — $ 42,779 $ — $ 42,779 Foreign exchange derivative contracts $ — $ 29 $ — $ 29 Financial Liabilities: Contingent consideration $ — $ — $ 51,538 $ 51,538 The contingent consideration, as of December 28, 2024 and December 30, 2023, 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. On a quarterly basis, the company assesses the projected results for each of the acquisitions in comparison to the earnout targets and adjusts the liability accordingly. Discount rates for valuing contingent consideration are determined based on the company rates and specific acquisition risk considerations. Changes in fair value associated with the earnout provisions are recognized in Selling, general and administrative expenses within the Consolidated Statements of Earnings. The following table represents changes in the fair value of the contingent consideration liabilities for the fiscal years 2024 and 2023: December 28, 2024 December 30, 2023 Beginning balance $ 51,538 $ 47,242 Payments of contingent consideration ( 4,141 ) ( 6,871 ) New contingent consideration 8,681 15,534 Changes in fair value ( 2,850 ) (4,367) Ending balance $ 53,228 $ 51,538 61 (k) Foreign Currency The income statements of the company’s foreign operations are translated at the monthly average rates. Assets and liabilities of the company’s foreign operations are translated at exchange rates at the balance sheet date. These translation adjustments are not included in determining net income for the period but are disclosed and accumulated in a separate component of stockholders’ equity. 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 $ 1.3 million, $ 8.7 million and $ 28.1 million in 2024, 2023 and 2022, respectively, and are included in other expense on the statements of earnings. (l) Shipping and Handling Costs Fees billed to the customer for shipping and handling are classified as a component of net revenues. Shipping and handling costs are included in cost of products sold. (m) Warranty Costs In the normal course of business, the company issues product warranties for specific product lines and provides for the estimated future warranty cost in the period in which the sale is recorded. The estimate of warranty cost is based on contract terms and historical warranty loss experience that is periodically adjusted for recent actual experience. Because warranty estimates are forecasts that are based on the best available information, claims costs may differ from amounts provided. Adjustments to initial obligations for warranties are made as changes in the obligations become reasonably estimable. A rollforward of the warranty reserve for the fiscal years 2024 and 2023 is as follows (in thousands): 2024 2023 Beginning balance $ 89,039 $ 82,096 Warranty reserve related to acquisitions 420 595 Warranty expense 100,236 89,122 Warranty claims paid ( 91,389 ) ( 82,774 ) Ending balance $ 98,306 $ 89,039 (n) Research and Development Costs Research and development costs, included in cost of sales in the consolidated statements of earnings, are charged to expense when incurred. These costs were $ 57.7 million, $ 53.1 million and $ 48.9 million in fiscal 2024, 2023 and 2022, respectively. (o) Non-Cash Share-Based Compensation 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 units 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. 62 (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 amounted to 471,000 , 509,000 and 852,000 for fiscal 2024, 2023 and 2022, respectively. The company's potentially dilutive securities consist of shares issuable on vesting of restricted stock units computed using the treasury method and amounted to approximately 53,000 , 67,000 and 73,000 for fiscal 2024, 2023 and 2022, respectively. During fiscal 2024, 2023 and 2022, the average market price of the company's common stock exceeded the exercise price of the Convertible Notes (as defined below) resulting in approximately 418,000 , 442,000 and 779,000 diluted common stock equivalents to be included in the diluted net earnings per share, respectively. There have been no material conversions to date. See Note 5, Financing Arrangements, in these Notes to the Consolidated Financial Statements for further details on the Convertible Notes. There were no anti-dilutive equity awards excluded from common stock equivalents for 2024, 2023 and 2022. (q) Consolidated Statements of Cash Flows Cash paid for interest was $ 97.7 million, $ 119.2 million and $ 77.2 million in fiscal 2024, 2023 and 2022, respectively. Cash payments totaling $ 116.9 million, $ 139.7 million and $ 114.0 million were made for income taxes during fiscal 2024, 2023 and 2022, respectively. (r) New Accounting Pronouncements Accounting Pronouncements - Recently Adopted In March 2023, the FASB issued Accounting Standards Update ASU 2023-01, Leases (Topic 842): Common Control Arrangements. This ASU clarified the accounting for leasehold improvements for leases under common control. The guidance is effective for the company beginning on January 1, 2024. The company adopted this standard in the first quarter of 2024 and it did not have a material impact on its Consolidated Financial Statements and disclosures. In November 2023, the FASB issued Accounting Standards Update ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The company adopted this standard effective January 1, 2024 using a retrospective method. For further information, refer to the Segments section in Note 10, "Segment Information." Accounting Pronouncements - To be adopted In December 2023, the FASB issued Accounting Standard Update ASU No. 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands the disclosures required in an entity’s income tax rate reconciliation table. This ASU requires consistent categories and greater disaggregation of information presented in the effective tax rate reconciliation and requires disclosure of income taxes paid both domestic and foreign jurisdictions. The guidance is effective for the company beginning on January 1, 2025 and is required to be applied prospectively, with retrospective application to prior periods allowed. Early adoption is permitted. The company is currently evaluating the impact the adoption of this guidance will have on its Consolidated Financial Statements and disclosures. In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures: Disaggregation of Income Statement Expenses, which requires disclosure of disaggregated information about specific categories underlying certain income statement expense line items in the footnotes to the financial statements for both annual and interim periods. This ASU is effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The company is currently evaluating the impact of the adoption of this standard. 63 (4) REVENUE RECOGNITION Revenue is recognized when the control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and represents the unit of account. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The company’s contracts can have multiple performance obligations or just a single performance obligation. 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. 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. Within the Commercial Foodservice Equipment and Residential Foodservice Equipment Groups, the estimated standalone selling price of equipment is based on observable prices. Within the Food Processing Equipment Group, the company estimates the standalone selling price based on expected cost to manufacture the good or complete the service plus an appropriate profit margin. Control may pass to the customer over time or at a point in time. In general, the Commercial Foodservice Equipment and Residential Foodservice Equipment Groups recognize revenue at the point in time control transfers to their customers based on contractual shipping terms. Revenue from equipment sold under our long-term contracts within the Food Processing Equipment group is recognized over time as the equipment is manufactured and assembled. Installation services provided in connection with the delivery of the equipment are also generally recognized as those services are rendered. Over time transfer of control is measured using an appropriate input measure (e.g., costs incurred or direct labor hours incurred in relation to total estimate). These measures include forecasts based on the best information available and therefore reflect the company's judgment to faithfully depict the transfer of the goods. Contract Estimates Accounting for long-term contracts within the Food Processing Equipment group involves the use of various techniques to estimate total contract revenue and costs. For the company’s long-term contracts, estimated profit for the equipment performance obligations is recognized as the equipment is manufactured and assembled. Profit on the equipment performance obligations is estimated as the difference between the total estimated revenue and expected costs to complete a contract. Contract cost estimates are based on labor productivity and availability, the complexity of the work to be performed, the cost and availability of materials and labor, and the performance of subcontractors. The company does not disclose information about remaining performance obligations that have original expected durations of one year or less. Contracts within the Commercial Foodservice and Residential Foodservice Equipment groups may contain variable consideration in the form of volume rebate programs. The company’s estimate of variable consideration is based on its experience with similarly situated customers using the portfolio approach. 64 Disaggregation of Revenue We disaggregate our net sales by reportable operating segment and geographical location as we believe it best depicts how the nature, timing and uncertainty of our net sales and cash flows are affected by economic factors. The following table summarizes our net sales by reportable operating segment and geographical location (in thousands): Commercial Foodservice Food Processing Residential Kitchen Total Twelve Months Ended December 28, 2024 United States and Canada $ 1,710,361 $ 443,404 $ 461,107 $ 2,614,872 Asia 215,258 28,985 18,462 262,705 Europe and Middle East 396,837 194,102 235,974 826,913 Latin America 96,780 64,512 9,380 170,672 Total $ 2,419,236 $ 731,003 $ 724,923 $ 3,875,162 Twelve Months Ended December 30, 2023 United States and Canada $ 1,828,416 $ 479,312 $ 513,333 $ 2,821,061 Asia 233,039 40,208 12,611 285,858 Europe and Middle East 369,823 145,293 258,201 773,317 Latin America 90,193 55,805 10,371 156,369 Total $ 2,521,471 $ 720,618 $ 794,516 $ 4,036,605 Twelve Months Ended December 31, 2022 United States and Canada $ 1,750,986 $ 426,124 $ 701,909 $ 2,879,019 Asia 212,182 20,306 32,121 264,609 Europe and Middle East 364,120 100,239 303,840 768,199 Latin America 67,474 43,300 10,252 121,026 Total $ 2,394,762 $ 589,969 $ 1,048,122 $ 4,032,853 Contract Balances Contract assets primarily relate to the company's right to consideration for work completed but not billed at the reporting date and are recorded in prepaid expenses and other in the Consolidated Balance Sheet. Contract assets are transferred to receivables when the right to consideration becomes unconditional. Contract liabilities relate to advance consideration received from customers for which revenue has not been recognized. Current contract liabilities are recorded in accrued expenses in the Consolidated Balance Sheet. Non-current contract liabilities are recorded in other non-current liabilities in the Consolidated Balance Sheet. Contract liabilities are reduced when the associated revenue from the contract is recognized. The following table provides information about contract assets and contract liabilities from contracts with customers (in thousands): December 28, 2024 December 30, 2023 Contract assets $ 68,025 $ 47,072 Contract liabilities $ 120,503 $ 118,681 Non-current contract liabilities $ 19,930 $ 15,721 During the twelve months period ended December 28, 2024, the company reclassified $ 43.3 million to accounts receivable which was included in the contract asset balance at the beginning of the period. During the twelve months period ended December 28, 2024, the company recognized revenue of $ 89.9 million which was included in the contract liability balance at 65 the beginning of the period. Additions to contract liabilities representing amounts billed to clients in excess of revenue recognized to date were $ 72.5 million during the twelve months period ended December 28, 2024. Additions to contract liabilities include $ 27.3 million related to companies acquired during the twelve months period ended December 28, 2024. Substantially all of the company's outstanding performance obligations will be satisfied within 12 to 36 months. There were no contract asset impairments during twelve months period ended December 28, 2024. (5) FINANCING ARRANGEMENTS 2024 2023 (in thousands) Senior secured revolving credit line $ — $ — Term loan facility 928,542 945,913 Delayed draw term loan facility 712,500 726,563 Convertible senior notes 745,074 741,501 Foreign loans 8,489 10,531 Other debt arrangement 462 687 Total debt 2,395,067 2,425,195 Less: Current maturities of long-term debt 43,949 44,822 Long-term debt $ 2,351,118 $ 2,380,373 Credit Facility 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 11, 2022, the company borrowed $ 750.0 million against the delayed draw term facility as provided under the Credit Agreement. The funds were used to reduce outstanding borrowings under the revolver. The delayed draw term loan amortizes in quarterly installments due on the last day of each fiscal quarter, and commenced on December 31, 2022, in an amount equal to 0.625 % of the principal drawn, with the balance, plus any accrued interest payable by October 21, 2026. As of December 28, 2024, the company had $ 1.6 billion of borrowings outstanding under its credit facility (the "Credit Facility"), including $ 931.3 million outstanding under the term loan ($ 928.5 million , net of unamortized issuance fees) and $ 712.5 million outstanding under the delayed draw term loan. The company also had $ 4.3 million in outstanding letters of credit as of December 28, 2024, which reduces the borrowing availability under the Credit Facility. Remaining borrowing capacity under this facility was $ 2.7 billion at December 28, 2024. 66 At December 28, 2024, borrowings under the Credit Facility accrued interest at a rate of 1.375 % above the daily simple or term Secured Overnight Financing Rate (“SOFR”) per annum or 0.375 % above the highest of the prime rate, the federal funds rate plus 0.50 % and one month Term SOFR plus 1.00 %. The interest rates on borrowings under the Credit Facility may be adjusted quarterly based on the company’s Funded Debt less Unrestricted Cash to Pro Forma EBITDA (the “Leverage Ratio”) on a rolling four-quarter basis. Additionally, a commitment fee based upon the Leverage Ratio is charged on the unused portion of the commitments under the Credit Facility. As of December 28, 2024, borrowings under the Credit Facility accrued interest at a minimum of 1.375 % above SOFR and the variable unused commitment fee will be at a minimum of 0.20 %. Borrowings under the Credit Facility accrue interest at a minimum of 1.375 % above the daily simple SOFR or term SOFR for the applicable interest period (each of which includes a spread adjustment of 0.10 %). The average interest rate per annum, inclusive of hedging instruments, on the debt under the Credit Facility was equal to 4.75 % at the end of the period and the variable commitment fee was equal to 0.20 % per annum as of December 28, 2024. The term loan and delayed draw term loan facilities had an average interest rate per annum, inclusive of hedging instruments, of 4.75 % as of December 28, 2024. In addition, the company has international credit facilities to fund working capital needs outside the United States. At December 28, 2024, these foreign credit facilities amounted to $ 8.5 million in U.S. Dollars with a weighted average per annum interest rate of approximately 2.42 %. The company’s debt is reflected on the balance sheet at cost. The fair values of the Credit Facility, term debt and foreign and other debt is based on the amount of future cash flows associated with each instrument discounted using the company's incremental borrowing rate. The company believes its interest rate margins on its existing debt are consistent with current market conditions and therefore the carrying value of debt reflects the fair value. The interest rate margin is based on the company's Leverage Ratio. The carrying value and estimated aggregate fair value, a level 2 measurement, based primarily on market prices, of debt excluding the Convertible Notes is as follows (in thousands): Dec 28, 2024 Dec 30, 2023 Carrying Value Fair Value Carrying Value Fair Value Total debt excluding convertible senior notes $ 1,649,994 $ 1,652,702 $ 1,683,694 $ 1,687,781 The company uses floating-to-fixed interest rate swap agreements to hedge variable interest rate risk associated with the Credit Facility. At December 28, 2024, the company had outstanding floating-to-fixed interest rate swaps totaling $ 225.0 million notional amount carrying an average interest rate of 2.59 % maturing in less than 12 months and $ 470.0 million notional amount carrying an average interest rate of 1.22 % that mature in more than 12 months but less than 38 months. The terms of the Credit Facility, as amended, limit the ability of the company and its subsidiaries to, with certain exceptions: incur indebtedness; grant liens; engage in certain mergers, consolidations, acquisitions and dispositions; make restricted payments; enter into certain transactions with affiliates; 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 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. The Credit Facility contains certain customary events of default, including, but not limited to, the failure to make required payments; bankruptcy and other insolvency events; the failure to perform certain covenants; the material breach of a representation or warranty; non-payment of certain other indebtedness; the entry of undischarged judgments against the company or any subsidiary for the payment of material uninsured amounts; the invalidity of the company guarantee or any subsidiary guaranty; and a change of control of the company. At December 28, 2024, the company was in compliance with all covenants pursuant to its borrowing agreements. 67 Convertible Notes The following table summarizes the outstanding principal amount and carrying value of the Convertible Notes: December 28, 2024 December 30, 2023 (in thousands) Principal amounts: Principal $ 747,499 $ 747,499 Unamortized issuance costs ( 2,425 ) ( 5,998 ) Net carrying amount $ 745,074 $ 741,501 The following table summarizes total interest expense recognized related to the Convertible Notes: Twelve Months Ended Dec 28, 2024 Dec 30, 2023 Dec 31, 2022 Contractual interest expense $ 7,433 $ 7,454 $ 7,475 Interest cost related to amortization of debt issuance costs 3,573 3,583 3,587 Total interest expense $ 11,006 $ 11,037 $ 11,062 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. Bank National Association, as trustee. 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 (the "2020 Capped Call Transactions") and the company used the net proceeds of the offering of the Convertible Notes to pay the aggregate amount of $ 104.7 million for them. The estimated fair value of the Convertible Notes was $ 844.7 million as of December 28, 2024 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 . The if-converted value of the Convertible Notes exceeded their respective principal value by $ 46.2 million as of December 28, 2024. The Convertible Notes are general unsecured obligations of the company. The Convertible Notes rank senior in right of payment to any of the company’s future indebtedness that is expressly subordinated in right of payment to the Convertible Notes; rank equal in right of payment to the company’s existing and future unsecured indebtedness that is not so subordinated; are effectively subordinated in right of payment to any of the company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and are structurally subordinated to all existing and future indebtedness and liabilities of the company’s subsidiaries. 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 %. In fiscal 2021, upon adoption of ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging- Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, the equity component was essentially reversed, increasing the liability and no longer requiring the company to recognize non-cash interest expense associated with the amortization of the debt discount. 68 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. The Convertible Notes are convertible based upon an initial conversion rate of 7.7746 shares of the company's common stock per $ 1,000 principal amount of the Convertible Notes, which is equivalent to an initial conversion price of approximately $ 128.62 per share of the company's common stock. The conversion rate will be subject to adjustment upon occurrence of certain specified events in accordance with the Indenture but will not be adjusted for accrued and unpaid interest. Additionally, in the event of a Fundamental Change (as defined in the Indenture), holders of the Convertible Notes may require the company to repurchase all or a portion of their Convertible Notes at a price equal to 100.0 % of the principal amount of Convertible Notes, plus any accrued and unpaid interest to, but excluding, the repurchase date. Upon conversion, the company will pay cash up to the aggregate principal amount of the Convertible Notes to be converted and pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at the company's election, in respect of the remainder, if any, of the company's conversion obligation in excess of the aggregate principal amount of the notes being converted. At December 28, 2024, none of these conditions existed. The Convertible Notes will mature on September 1, 2025 unless they are redeemed, repurchased or converted prior to such date in accordance with their terms. Prior to the close of business on the business day immediately preceding June 1, 2025, the notes will be convertible at the option of the holders only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ending on January 2, 2021 (and only during such fiscal quarter), if the last reported sale price of the company's common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130.0 % of the conversion price for the Convertible Notes on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period in which the trading price per $ 1,000 principal amount of the Convertible Notes for each trading day of that ten consecutive trading day period was less than 98.0 % of the product of the last reported sale price of the company's common stock and the conversion rate of the Convertible Notes on each such trading day; (3) if the company calls such Convertible Notes for redemption; or (4) upon the occurrence of specified corporate events. On or after June 1, 2025, the notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. Holders of the Convertible Notes who convert in connection with a Make-Whole Fundamental Change or during a Redemption Period (each as defined in the Indenture) will be, under certain circumstances, entitled to an increase in the conversion rate. The company may settle the conversions of the Convertible Notes in cash, shares of the company's common stock or any combination thereof at its election. The number of shares of the company's common stock issuable at the conversion price of $ 128.62 per share is expected to be 5.8 million shares. However, the Capped Call Transactions are expected generally to reduce the potential dilution of the company's common stock upon any conversion of Convertible Notes and/or offset the cash payments the company is required to make in excess of the principal amount of the Notes. 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. 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. Under the 2022 Capped Call Transactions, the number of shares of common stock issuable at the conversion price of $ 229.00 is expected to be 3.3 million shares. As of December 28, 2024, one Convertible Note has 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. The Indenture includes customary terms and covenants, including certain events of default after which the Convertible Notes may become due and payable immediately. 69 Capped Call Transactions In connection with the pricing of the Convertible Notes, the company entered into privately negotiated Capped Call Transactions (the "2020 Capped Call Transactions") and the company used the net proceeds of the offering of the Convertible Notes to pay the aggregate amount of $ 104.7 million for them. The company entered into two tranches of privately negotiated Capped Call Transactions in December 2021 (the "2021 Capped Call Transactions") in the aggregate amount of $ 54.6 million. On March 15, 2022, the company entered into an additional tranche of privately negotiated Capped Call Transactions (the "2022 Capped Call Transactions") in the amount of $ 9.7 million. The 2020, 2021, and 2022 Capped Call Transactions (collectively, the "Capped Call Transactions") are expected generally to reduce the potential dilution and/or offset the cash payments the company is required to make in excess of the principal amount of the Convertible Notes upon conversion of the Convertible Notes in the event that the market price per share of the company's common stock is greater than the strike price of the Capped Call Transactions (which initially corresponds to the initial conversion price of the Convertible Notes and is subject to certain adjustments under the terms of the Capped Call Transactions), with such reduction and/or offset subject to a cap based on the cap price of the Capped Call Transactions. The 2020 Capped Call Transactions have an initial cap price of $ 207.93 per share of the company's common stock. The 2021 Capped Call Transactions have initial cap prices of $ 216.50 and $ 225.00 per share of the company's common stock. The 2022 Capped Call Transactions have an initial cap price of $ 229.00 per share. The Capped Call Transactions cover, initially, the number of shares of the company's common stock underlying the Convertible Notes, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes. The Capped Call Transactions are separate transactions entered into by the company with the capped call counterparties, and are not part of the terms of the Convertible Notes and will not affect any holder's right under the Convertible Notes. Holders of the Convertible Notes will not have any rights with respect to the Capped Call Transactions. The Capped Call Transactions do not meet the criteria for separate accounting as a derivative as they are indexed to the company's stock. The premiums paid of the Capped Call Transactions have been included as a net reduction to additional paid-in capital with stockholders' equity. The aggregate amount of debt payable during each of the next five years is as follows (in thousands): 2025 (1) $ 789,023 2026 1,600,151 2027 828 2028 693 2029 and thereafter 4,372 $ 2,395,067 (1) The current year debt payable includes the maturities of the convertible notes. 70 (6) COMMON AND PREFERRED STOCK (a) Shares Authorized At December 28, 2024 and December 30, 2023, 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 In November 2017, the company's Board of Directors approved a stock repurchase program authorizing the company to repurchase in the aggregate up to 2,500,000 shares of its outstanding common stock. In May 2022 and July 2024, the company's Board of Directors approved the company to repurchase an additional 2,500,000 shares of its outstanding common stock under the current program. During 2023, the company repurchased 397,738 shares of its common stock under the program for $ 55.6 million, including applicable commissions, which represented an average price of $ 139.68 . During 2024, the company repurchased 117,526 shares of its common stock under the program for $ 16.4 million, including applicable commissions, which represented an average price of $ 139.39 . As of December 28, 2024, 3,233,890 shares had been purchased under the 2017 stock repurchase program and 4,266,110 remain authorized for repurchase. The company also treats shares withheld for tax purposes on behalf of employees in connection with the vesting of restricted share grants as common stock repurchases because they reduce the number of shares that would have been issued upon vesting. During 2023, the company repurchased 126,704 shares of its common stock that were surrendered to the company for withholding taxes related to restricted stock vestings for $ 19.8 million. During 2024, the company repurchased 118,171 shares of its common stock that were surrendered to the company for withholding taxes related to restricted stock vestings for $ 18.3 million. (c) Share-Based Awards 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 December 28, 2024 is 372,167 . Non-cash share-based compensation of $ 36.2 million, $ 51.0 million and $ 58.4 million was recognized for fiscal 2024, 2023 and 2022, respectively, associated with restricted share grants and restricted stock units. The company recorded a related tax benefit of $ 0.1 million, $ 0.8 million and $ 1.3 million in fiscal 2024, 2023 and 2022, 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 $ 136.13 and $ 188.31 per share for restricted share grants in fiscal 2023 and 2022 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 $ 0.3 million, $ 0.6 million, $ 29.1 million for fiscal 2024, 2023 and 2022, respectively. 71 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 December 28, 2024 is as follows: Shares Weighted Average Grant-Date Fair Value Nonvested shares at December 30, 2023 2,080 136.13 Granted — — Vested ( 2,080 ) 150.73 Forfeited — — Nonvested shares at December 28, 2024 — — As of December 28, 2024, all compensation cost related to nonvested restricted share grant compensation arrangements were recognized and there are no additional nonvested shares. 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 $ 132.38 , $ 147.13 and $ 150.07 per share for restricted stock units in fiscal 2024, 2023 and 2022, respectively. The approximate fair value of restricted stock units vested were $ 30.6 million for fiscal 2024. 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 December 28, 2024 is as follows: Units Weighted Average Grant-Date Fair Value Nonvested shares at December 30, 2023 651,731 160.15 Granted 255,686 132.38 Vested ( 196,425 ) 161.68 Forfeited ( 13,314 ) 146.37 Nonvested shares at December 28, 2024 697,678 149.80 As of December 28, 2024, there was $ 48.0 million of total unrecognized compensation cost related to nonvested restricted stock unit compensation arrangements, if all performance conditions are achieved as estimated. The remaining weighted average life is 2.03 years . 72 (7) INCOME TAXES Earnings before taxes is summarized as follows (in thousands): 2024 2023 2022 Domestic $ 415,156 $ 346,815 $ 383,813 Foreign 162,164 172,563 180,602 Total $ 577,320 $ 519,378 $ 564,415 The provision for income taxes is summarized as follows (in thousands): 2024 2023 2022 Federal $ 88,770 $ 67,023 $ 62,416 State and local 16,510 15,934 23,892 Foreign 43,607 35,539 41,538 Total $ 148,887 $ 118,496 $ 127,846 Current $ 113,010 $ 120,901 $ 134,488 Deferred 35,877 ( 2,405 ) ( 6,642 ) Total $ 148,887 $ 118,496 $ 127,846 The r econciliation of the differences between income taxes computed at the federal statutory rate to the effective rate were as follows: 2024 2023 2022 U.S. federal statutory tax rate 21.0 % 21.0 % 21.0 % State taxes, net of federal benefit 3.1 3.1 3.3 Permanent differences 0.6 0.6 0.9 Foreign income tax rate at rates other than U.S. statutory 1.4 0.2 0.2 Deferred tax changes — — — Change in valuation allowances 0.2 — — Tax on unremitted earnings 0.7 0.4 0.3 Federal Refund — — — Internal restructuring — — ( 2.3 ) Other ( 1.2 ) ( 2.5 ) ( 0.7 ) Consolidated effective tax 25.8 % 22.8 % 22.7 % (1) Net of changes in related tax attributes. A tax provision of $ 148.9 million, at an effective rate of 25.8 %, was recorded for fiscal 2024 as compared to $ 118.5 million at an effective rate of 22.8 %, in fiscal 2023. The fiscal 2024 tax provision includes a $ 3.6 million tax expense for the finalization of the 2023 tax returns as compared to the fiscal 2023 provision that included a net tax benefit of $ 7.0 million for the finalization of the 2022 tax returns. The effective rates in 2024 and 2023 were higher than the federal tax rate of 21.0 % primarily due to state taxes and foreign tax rate differentials. 73 At December 28, 2024 and December 30, 2023, the company had recorded the following deferred tax assets and liabilities (in thousands): 2024 2023 Deferred tax assets: Compensation related $ 20,550 $ 29,135 Pension and post-retirement benefits 489 1,435 Inventory reserves 29,392 27,311 Accrued liabilities and reserves 23,185 22,017 Warranty reserves 21,293 20,956 Operating lease liability 22,423 22,096 Basis difference on affiliates 7,443 12,099 Capitalized R&D costs 45,855 39,585 Convertible debt 6,502 15,860 Net operating loss carryforwards 11,957 12,989 Other 26,180 22,871 Gross deferred tax assets $ 215,269 $ 226,354 Valuation allowance ( 14,054 ) ( 15,749 ) Deferred tax assets $ 201,215 $ 210,605 Deferred tax liabilities: Intangible assets $ ( 318,699 ) $ ( 310,847 ) Depreciable assets ( 43,746 ) ( 40,036 ) Interest rate swaps ( 7,587 ) ( 10,927 ) Operating lease right-of-use assets ( 21,754 ) ( 21,139 ) Pension and post-retirement benefits ( 22,886 ) ( 9,719 ) Other ( 32,324 ) ( 26,135 ) Deferred tax liabilities $ ( 446,996 ) $ ( 418,803 ) Net deferred tax assets (liabilities) $ ( 245,781 ) $ ( 208,198 ) Long-term deferred asset 6,281 7,945 Long-term deferred liability ( 252,062 ) ( 216,143 ) Net deferred tax assets (liabilities) $ ( 245,781 ) $ ( 208,198 ) The company has recorded tax reserves on undistributed foreign earnings not permanently reinvested of $ 15.0 million and $ 12.0 million at December 28, 2024 and December 30, 2023, 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 $ 815.0 million on December 28, 2024. Determination of the total amount of unrecognized deferred income taxes on undistributed earnings net of foreign subsidiaries is not practicable. The company has a deferred tax asset on net operating loss carryforwards totaling $ 12.0 million as of December 28, 2024. These net operating losses are available to reduce future taxable earnings of certain domestic and foreign subsidiaries. United States federal loss carryforwards total $ 8.5 million of which $ 2.7 million will expire through 2036 and $ 5.8 million have no expiration date. State loss carryforwards total $ 10.0 million and expire through 2039 and international loss carryforwards total $45.0 million that can be carried forward indefinitely. Of these carryforwards, $ 34.7 million are subject to full valuation allowance. 74 As of December 28, 2024, the total amount of liability for unrecognized tax benefits related to federal, state and foreign taxes was approximately $ 29.6 million (of which $ 29.6 million would impact the effective tax rate if recognized) plus approximately $ 10.0 million of accrued interest and $ 6.7 million of penalties. The company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. Interest recognized in fiscal years 2024, 2023 and 2022 was $ 0.6 million, $ 1.4 million and $ 0.6 million, respectively. Penalties recognized in fiscal years 2024, 2023 and 2022 were $( 0.3 ) million, $ 0.0 million and $ 0.2 million, respectively. The following table summarizes the activity related to the unrecognized tax benefits for the fiscal years ended December 31, 2022, December 30, 2023 and December 28, 2024 (in thousands): Balance at December 31, 2022 $ 33,648 Increases to current year tax positions 2,126 Lapse of statute of limitations ( 1,852 ) Balance at December 30, 2023 $ 33,922 Increases to current year tax positions 3,689 Settlements (639) Lapse of statute of limitations ( 7,421 ) Balance as of December 28, 2024 $ 29,551 The company believes that it is reasonably possible that $ 3.9 million of its remaining unrecognized tax benefits may be recognized by the end of 2025 as a result of settlements with taxing authorities or lapses of statutes of limitations. In the normal course of business, income tax authorities in various income tax jurisdictions both in the United States and internationally conduct routine audits of our income tax returns filed in prior years. These audits are generally designed to determine if individual income tax authorities are in agreement with our interpretations of complex tax regulations regarding the allocation of income to the various income tax jurisdictions. Income tax years are open from 2021 through the current year for the United States federal jurisdiction. Income tax years open for our other major jurisdictions range from 2017 through the current year. Although the company believes its tax returns are correct, the final determination of tax examinations may be different than what was reported on the tax returns. In the opinion of management, adequate tax provisions have been made for the years subject to examination. 75 (8) FINANCIAL INSTRUMENTS Derivatives are measured at fair value and recognized as either assets or liabilities. Derivatives that do not qualify as a hedge must be adjusted to fair value in earnings. If a derivative does qualify, changes in the fair value will either be offset against the change in the fair value of the hedged assets, liabilities or firm commitments or recognized in other accumulated comprehensive income until the hedged item is recognized in earnings. (a) Foreign Exchange The company periodically enters into derivative instruments, principally forward contracts to reduce exposures pertaining to fluctuations in foreign exchange rates. The notional amount of foreign currency contracts outstanding was $ 239.3 million and $ 253.1 million as of December 28, 2024 and December 30, 2023, respectively. The fair value of these forward contracts was an unrealized loss of $ 1.4 million at the end of the year. (b) Interest Rate The company has entered into interest rate swaps to fix the interest rate applicable to certain of its variable-rate debt. Prior to July 1, 2023, the company amended its Credit Facility and the existing interest rate swap agreements to transition the interest reference rate from one-month LIBOR to one-month SOFR. There were no other changes to the company's Credit Facility or timing of cash flows. The amendment was entered into because the LIBOR rate historically used was no longer published after June 30, 2023. The company utilized expedients within ASC 848 to conclude that this amendment should be treated as a non-substantial modification of the existing contract, resulting in no impact to the company's consolidated financial statements. 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 an asset of $ 30.0 million and $ 42.8 million as of December 28, 2024 and December 30, 2023, respectively. The change in fair value of these swap agreements in 2024 was a loss of $ 9.6 million, net of taxes. A summary of the company’s interest rate swaps is as follows (in thousands): Twelve Months Ended Location Dec 28, 2024 Dec 30, 2023 Fair value Prepaid expenses $ 1,986 $ 2,897 Fair value Other assets $ 27,966 $ 39,882 Amount of gain/(loss) recognized in other comprehensive income Other comprehensive income $ 14,377 $ 10,015 Gain/(loss) reclassified from accumulated other comprehensive income (effective portion) Interest expense $ 27,204 $ 32,221 Interest rate swaps are subject to default risk to the extent the counterparty is unable to satisfy its settlement obligations under the interest rate swap agreements. The company reviews the credit profile of the financial institutions that are counterparties to such swap agreements and assesses their creditworthiness prior to entering into the interest rate swap agreements and throughout the term. The interest rate swap agreements typically contain provisions that allow the counterparty to require early settlement in the event that the company becomes insolvent or is unable to maintain compliance with its covenants under its existing debt agreement. (9) LEASE COMMITMENTS Accounting Policy At the commencement date of a lease, the company recognizes a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. The lease liability is measured at the present value of lease payments over the lease term, including variable fees that are known or subject to a minimum floor. The lease liability includes lease component fees, while non-lease component fees are expensed as incurred for all asset classes. The company's lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. When a contract excludes an implicit rate, the company utilizes an incremental borrowing rate based on information available at the lease commencement date including lease term and geographic region. The initial valuation of the right-of-use (“ROU”) asset includes the initial measurement of the lease liability, lease payments made in advance of the lease commencement date and 76 initial direct costs incurred by the company and excludes lease incentives. Operating lease ROU assets are included in other assets and operating lease liabilities are included in accrued expenses and other non-current liabilities. Leases with an initial term of 12 months or less are classified as short-term leases and are not recorded on the Consolidated Balance Sheets. The lease expense for short-term leases is recognized on a straight-line basis over the lease term. Leases The company leases warehouse space, office facilities and equipment under operating leases. The company had operating lease costs of $ 39.3 million, $ 39.6 million and $ 35.7 million in fiscal 2024, 2023 and 2022 respectively, including short-term lease expense and variable lease costs, which were immaterial in the year. Leases (in thousands) December 28, 2024 December 30, 2023 Operating lease right-of-use assets: Other assets $ 121,168 $ 109,373 Operating lease liabilities: Accrued expenses 27,938 26,417 Other non-current liabilities 98,042 87,550 Total Liability $ 125,980 $ 113,967 Total Lease Commitments (in thousands) Operating Leases 2025 $ 32,266 2026 28,416 2027 22,337 2028 18,295 2029 14,608 2030 and thereafter 26,156 Total future lease commitments 142,078 Less imputed interest 16,098 Total $ 125,980 Other Lease Information (in thousands, except lease term and discount rate) Twelve Months Ended December 28, 2024 Twelve Months Ended December 30, 2023 Supplemental cash flow information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 33,719 $ 30,117 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 21,305 $ 28,524 December 28, 2024 December 30, 2023 Weighted-average remaining lease terms - Operating 5.7 years 5.2 years Weighted-average discount rate - Operating 4.3 % 3.6 % 77 (10) SEGMENT INFORMATION An operating segment is defined as a component of an enterprise which has discrete financial information that is evaluated regularly. The company determined that its Chief Executive Officer is the Chief Operating Decision Maker (the "CODM") who possesses the ultimate authority with respect to assessment of performance, allocation of resources, and all strategic actions of the company. In performing this responsibility, the CODM regularly reviews key internal management reports, financial information including forecasts, and quarterly results, which are prepared at the operating segment level. In accordance with ASC 280-10, Segment Reporting , the company operates in three reportable operating segments defined by management reporting structure and operating activities. The Company’s reportable segments are: (i) the Commercial Foodservice Equipment Group, (ii) the Food Processing Equipment Group, and (iii) the Residential Kitchen Equipment Group. Adjusted EBITDA is the profitability metric reported to the CODM for purposes of making decisions about allocation of resources to each segment and assessing performance of each segment. The company defines Adjusted EBITDA as operating income less depreciation, intangible amortization, restructuring, acquisition related adjustments, impairments, stock compensation and other non-recurring items which management considers to be outside core operating results. The CODM reviews this metric regularly to compare the profitability of segments, identify trends, and evaluate which segments require additional resources or strategic adjustments. The CODM uses Adjusted EBITDA to support the allocation of resources predominantly in the annual budget and forecasting process. The company believes that investors find this measure useful in comparing our operating performance to that of other companies in our industry because this measure generally illustrates the underlying performance of the business. Management believes that inter-segment sales are made at established arm's length transfer prices. All inter-segment transactions are eliminated and values are presented net of eliminations. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Additional detail about each of the reportable segments and its corporate income and expenses is set forth below: The Commercial Foodservice Equipment Group manufactures, sells, and distributes foodservice equipment for the restaurant and institutional kitchen industry. The Food Processing Equipment Group manufactures preparation, cooking, packaging food handling and food safety equipment for the food processing industry. The Residential Kitchen Equipment Group manufactures, sells and distributes kitchen equipment for the residential market. 78 The following table summarizes the results of operations for the company’s business segments (1) (dollars in thousands): Commercial Foodservice Food Processing Residential Kitchen Corporate and Other (2) Total 2024 Net sales $ 2,419,236 $ 731,003 $ 724,923 $ — $ 3,875,162 Cost of sales 1,460,903 440,358 506,372 ( 2,840 ) 2,404,793 Other segment items (3,4) 294,375 103,382 144,961 61,356 604,074 Segment adjusted EBITDA (5) 663,958 187,263 73,590 ( 58,516 ) 866,295 Depreciation expense (6) 28,621 9,386 15,847 1,755 55,609 Amortization expense (7) 49,133 8,091 7,214 7,127 71,565 Net capital expenditures 23,220 12,636 12,514 940 49,310 Total assets 3,657,431 1,142,875 1,930,705 552,140 7,283,151 Long-lived assets (8) 338,989 133,994 272,644 78,222 823,849 2023 Net sales $ 2,521,471 $ 720,618 $ 794,516 $ — $ 4,036,605 Cost of sales 1,510,920 446,239 544,532 852 2,502,543 Other segment items (3) 311,131 95,044 154,139 73,354 633,668 Segment adjusted EBITDA (5) 699,420 179,335 95,845 ( 74,206 ) 900,394 Depreciation expense (6) 27,323 7,949 13,637 1,507 50,416 Amortization expense (7) 56,728 9,271 9,052 7,137 82,188 Net capital expenditures 39,272 14,999 25,960 4,948 85,179 Total assets 3,751,746 1,009,857 1,941,204 203,885 6,906,692 Long-lived assets (8) 340,375 98,920 227,131 95,021 761,447 2022 Net sales $ 2,394,762 $ 589,969 $ 1,048,122 $ — $ 4,032,853 Cost of sales 1,485,321 377,389 722,358 1,231 2,586,299 Other segment items (3) 282,385 82,437 146,675 81,649 593,146 Segment adjusted EBITDA (5) 627,056 130,143 179,089 ( 82,880 ) 853,408 Depreciation expense (6) 24,299 6,045 13,596 679 44,619 Amortization expense (7) 54,872 14,034 17,376 7,159 93,441 Net capital expenditures 28,718 13,957 20,604 4,010 67,289 Total assets 3,788,245 983,797 1,972,351 130,473 6,874,866 Long-lived assets (8) 318,457 84,370 151,499 108,478 662,804 (1) Non-operating expenses are not allocated to the reportable segments. Non-operating expenses consist of interest expense and deferred financing amortization, foreign exchange gains and losses and other income and expense items outside of income from operations. (2) Includes corporate and other general company assets and operations. (3) Other segment items for each reportable segment includes operating expenses, which primarily consists of selling, general and administrative expenses. Other segment items excludes the impact of depreciation, intangible amortization, restructuring, impairments, stock compensation and other items that neither relate to the ordinary course of the Company’s business nor reflect the Company’s underlying business performance. (4) Gain on sale of plant is included in Food Processing. (5) Excludes the impacts mentioned in Other segment items. (6) Includes depreciation on right of use assets. (7) Includes amortization of deferred financing costs and Convertible Notes issuance costs. (8) Long-lived assets consist of property, plant and equipment, long-term deferred tax assets and other assets. 79 A reconciliation of our segment information for earnings before income taxes to the corresponding amounts in the Consolidated Statements of Earnings is shown in the table below for the periods presented: 2024 2023 2022 Adjusted EBITDA $ 866,295 $ 900,394 $ 853,408 Less: Other segment operating expenses (1) 210,107 265,526 213,804 Income from operations 656,188 634,868 639,604 Interest expense and deferred financing amortization, net 92,229 120,348 88,977 Net periodic pension benefit (other than service cost & curtailment) ( 14,897 ) ( 9,071 ) ( 42,681 ) Other expense, net 1,536 4,213 28,893 Earnings before income taxes 577,320 519,378 564,415 Provision for income taxes 148,887 118,496 127,846 Net earnings $ 428,433 $ 400,882 $ 436,569 (1) Consists of the impact of depreciation, intangible amortization, restructuring, impairments, stock compensation and other items that neither relate to the ordinary course of the Company’s business nor reflect the Company’s underlying business performance. Geographic Information Long-lived assets, not including goodwill and other intangibles (in thousands): 2024 2023 2022 United States and Canada $ 511,454 $ 502,479 $ 471,375 Asia 37,610 40,849 35,965 Europe and Middle East 264,337 205,621 142,326 Latin America 10,448 12,498 13,138 Total International 312,395 258,968 191,429 $ 823,849 $ 761,447 $ 662,804 (11) EMPLOYEE RETIREMENT PLANS (a) Pension Plans U.S. Plans: The company maintains a non-contributory defined benefit plan for its union employees at the Elgin, Illinois facility. Benefits are determined based upon retirement age and years of service with the company. This defined benefit plan was frozen on April 30, 2002, and no further benefits accrue to the participants beyond this date. Plan participants will receive or continue to receive payments for benefits earned on or prior to April 30, 2002 upon reaching retirement age. The company maintains a non-contributory defined benefit plan for its employees at the Smithville, Tennessee facility. Benefits are determined based upon retirement age and years of service with the company. This defined benefit plan was frozen on April 1, 2008, and no further benefits accrue to the participants beyond this date. Plan participants will receive or continue to receive payments for benefits earned on or prior to April 1, 2008 upon reaching retirement age. The company also maintains a retirement benefit agreement with its former Chairman ("Chairman Plan"). The retirement benefits are based upon a percentage of the former Chairman’s final base salary. Non-U.S. Plans: The company maintains a defined benefit plan for its employees at the Wrexham, the United Kingdom facility. Benefits are determined based upon retirement age and years of service with the company. This defined benefit plan was frozen on April 30, 80 2010 and no further benefits accrue to the participants beyond this date. Plan participants will receive or continue to receive payments for benefits earned on or prior to April 30, 2010 upon reaching retirement age. The company maintains several pension plans related to AGA and its subsidiaries (collectively, the "AGA Group"), the most significant being the Aga Rangemaster Group Pension Scheme in the United Kingdom. Membership in the plan on a defined benefit basis of pension provision was closed to new entrants in 2001. 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. The other, much smaller, defined benefit pension plans operating within the AGA Group cover employees in France and the United Kingdom. All pension plan assets are held in separate trust funds although the net defined benefit pension obligations are included in the company's consolidated balance sheet. A summary of the plans’ net periodic pension cost, benefit obligations, funded status, and net balance sheet position is as follows (dollars in thousands) Fiscal 2024 Fiscal 2023 U.S. Plans Non-U.S. Plans U.S. Plans Non-U.S. Plans Net Periodic Pension Cost (Benefit): Interest cost 1,267 43,892 1,315 46,046 Expected return on assets ( 926 ) ( 62,289 ) ( 873 ) ( 58,766 ) Amortization of net loss 281 204 420 186 Amortization of prior service cost — 2,674 — 2,601 $ 622 $ ( 15,519 ) $ 862 $ ( 9,933 ) Change in Benefit Obligation: Benefit obligation – beginning of year $ 27,659 $ 989,106 $ 27,550 $ 946,153 Interest on benefit obligations 1,267 43,892 1,315 46,046 Actuarial (gain) loss ( 1,598 ) ( 94,002 ) 539 1,970 Net benefit payments ( 1,747 ) ( 61,506 ) ( 1,745 ) ( 59,018 ) Exchange effect — ( 10,348 ) — 53,955 Benefit obligation – end of year $ 25,581 $ 867,142 $ 27,659 $ 989,106 Change in Plan Assets: Plan assets at fair value – beginning of year $ 15,751 $ 1,027,421 $ 14,998 $ 943,757 Company contributions 1,244 103 1,114 6,012 Investment gain 760 4,086 1,384 81,945 Benefit payments and plan expenses ( 1,747 ) ( 61,506 ) ( 1,745 ) ( 59,018 ) Exchange effect — ( 11,755 ) — 54,725 Plan assets at fair value – end of year $ 16,008 $ 958,349 $ 15,751 $ 1,027,421 Funded Status: Unfunded benefit obligation $ ( 9,573 ) $ 91,207 $ ( 11,908 ) $ 38,315 Amounts recognized in balance sheet at year end: Accrued pension benefits $ ( 9,573 ) $ 91,207 $ ( 11,908 ) $ 38,315 81 Fiscal 2024 Fiscal 2023 U.S. Plans Non-U.S. Plans U.S. Plans Non-U.S. Plans Pre-tax components in accumulated other comprehensive income at period end: Net actuarial loss $ 297 $ 64,371 $ 2,011 $ 103,705 Pre-tax components recognized in other comprehensive income for the period: Current year actuarial (gain) loss $ ( 1,432 ) $ ( 36,008 ) $ 28 $ ( 17,079 ) Actuarial loss recognized ( 281 ) ( 205 ) ( 420 ) ( 150 ) Prior service cost recognized — ( 3,121 ) — ( 360 ) Total amount recognized $ ( 1,713 ) $ ( 39,334 ) $ ( 392 ) $ ( 17,589 ) Accumulated Benefit Obligation $ 25,581 $ 867,119 $ 27,659 $ 989,081 Salary growth rate n/a 0.8 % n/a 0.8 % Assumed discount rate 5.4 % 5.5 % 4.8 % 4.6 % Expected return on assets 6.0 % 5.9 % 6.0 % 6.2 % The company has engaged non-affiliated third-party professional investment advisors to assist the company in developing its investment policy and establishing asset allocations. The company's overall investment objective is to provide a return, that along with company contributions, is expected to meet future benefit payments. Investment policy is established in consideration of anticipated future timing of benefit payments under the plans. The anticipated duration of the investment and the potential for investment losses during that period are carefully weighed against the potential for appreciation when making investment decisions. The company routinely monitors the performance of investments made under the plans and reviews investment policy in consideration of changes made to the plans or expected changes in the timing of future benefit payments. The assets of the plans were invested in the following classes of securities (none of which were securities of the company): U.S. Plans: Target Allocation Percentage of Plan Assets 2024 2023 Equity 48 % 51 % 43 % Fixed income 40 39 42 Money market 4 2 6 Other (real estate investment trusts & commodities contracts) 8 8 9 100 % 100 % 100 % Non-U.S. Plans: Target Allocation Percentage of Plan Assets 2024 2023 Equity 17 % 7 % 11 % Fixed income 75 94 69 Alternatives/Other 6 ( 18 ) 5 Real Estate 2 10 9 Cash and cash equivalents — 7 6 100 % 100 % 100 % 82 In accordance with ASC 820 Fair Value Measurements and Disclosures , the company has measured its defined benefit pension plans at fair value. 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 December 28, 2024 and December 30, 2023 (in thousands): U.S. Plans: Fiscal 2024 Fiscal 2023 Asset Category Total Quoted Prices in Active Markets for Identical Assets (Level 1) Net Asset Value Total Quoted Prices in Active Markets for Identical Assets (Level 1) Net Asset Value Short Term Investment Fund (a) $ 414 $ — $ 414 $ 920 $ — $ 920 Equity Securities: Large Cap 3,805 3,805 — 2,862 2,862 — Mid Cap 402 402 — 373 373 — Small Cap 393 393 — 388 388 — International 3,622 3,622 — 3,218 3,218 — Fixed Income: Government/Corporate 4,528 4,528 — 4,776 4,776 — High Yield 1,143 1,143 — 1,063 1,063 — Other 484 484 — 705 705 — Alternative: Global Real Estate Investment Trust 926 926 — 663 663 — Commodities Contracts 291 291 — 783 783 — Total $ 16,008 $ 15,594 $ 414 $ 15,751 $ 14,831 $ 920 (a) Represents collective short term investment fund, composed of high-grade money market instruments with short maturities. 83 Non-U.S. Plans: Fiscal 2024 Asset Category Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Net Asset Value Cash and cash equivalents $ 64,699 $ 7,881 $ 45,734 $ — $ 11,084 Equity Securities: UK 3,511 976 — — 2,535 International: Developed 57,153 1,531 — — 55,622 Emerging 13,390 203 — — 13,187 Unquoted/Private Equity 2,304 — — — 2,304 Fixed Income: Government/Corporate: UK 526,394 9,618 9,388 — 507,388 International 93,888 — 63,482 — 30,406 Index Linked 300,098 1,480 — — 298,618 Other 315 — — — 315 Real Estate: Direct 92,388 — 92,388 — — Indirect 3,184 33 — — 3,151 Leveraged Loans 28,292 — — — 28,292 Alternative/Other ( 227,267 ) — 613 — ( 227,880 ) Total $ 958,349 $ 21,722 $ 211,605 $ — $ 725,022 84 Fiscal 2023 Asset Category Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Net Asset Value Cash and cash equivalents $ 64,285 $ 10,175 $ 25,777 $ — $ 28,333 Equity Securities: UK 3,665 45 — — 3,620 International: Developed 89,498 1,738 — — 87,760 Emerging 20,698 168 — — 20,530 Unquoted/Private Equity 282 — — — 282 Fixed Income: Government/Corporate: UK 247,618 11,049 — — 236,569 International 133,279 — — — 133,279 Index Linked 322,408 2,088 — — 320,320 Other 3,222 — — — 3,222 Convertible Bonds Real Estate: Direct 91,993 — 91,993 — — Indirect 1,768 37 — — 1,731 Hedge Fund Strategy: Equity Long/Short 8,361 — — — 8,361 Arbitrage & Event 10,731 — — — 10,731 Directional Trading & Fixed Income 315 — — — 315 Cash & Other 162,812 — — — 162,812 Direct Sourcing 913 — — — 913 Leveraged Loans 14,475 — — — 14,475 Alternative/Other ( 148,902 ) 1,060 — — ( 149,962 ) Total $ 1,027,421 $ 26,360 $ 117,770 $ — $ 883,291 The fair value of the Level 1 assets is based on observable quoted market prices of the identical underlying security in an active market. The fair value of the Level 2 assets is primarily based on market observable inputs to quoted market prices, benchmark yields and broker/dealer quotes. Level 3 inputs, as applicable, represent unobservable inputs that reflect assumptions developed by management to measure assets at fair value. The expected return on assets is developed in consideration of the anticipated duration of investment period for assets held by the plan, the allocation of assets in the plan, and the historical returns for plan assets. 85 Estimated future benefit payments under the plans are as follows (dollars in thousands): U.S. Plans Non-U.S. Plans 2025 $ 1,909 $ 60,123 2026 1,929 60,248 2027 1,941 60,734 2028 1,952 61,009 2029 through 2034 11,412 362,589 The expected contributions to the U.S. Plans to be made in 2025 is $ 0.6 million. For the Non-U.S. Plans, the expected contribution is nil in 2025. (b) Defined Contribution Plans As of December 28, 2024, the company maintained two separate defined contribution 401(k) savings plans covering all employees in the United States. These two plans separately cover the union employees at the Elgin, Illinois facility and all other remaining union and non-union employees in the United States. The company also maintained defined contribution plans for its UK based employees. (12) RESTRUCTURING AND ACQUISITION INTEGRATION INITIATIVES Residential Kitchen Equipment Group: During fiscal years 2024 and 2023, the company initiated cost reduction initiatives related to the Residential Kitchen Equipment Group including headcount reductions and facility consolidations. These actions resulted in expenses of $ 5.9 million and $ 9.4 million, in the twelve months ended December 28, 2024 and December 30, 2023, respectively. These actions are reflected in the restructuring expenses in the Consolidated Statements of Earnings. The primary realization of cost savings from the restructuring initiatives began in 2023 with cumulative expected annual savings of approximately $ 28.0 million. At December 28, 2024, the restructuring obligations accrued for these initiatives are immaterial and will be substantially complete by the end of fiscal year 2025. The restructuring expenses for the other segments of the company were not material during fiscal years 2024, 2023 and 2022. (13) SUBSEQUENT EVENTS On February 25, 2025, the company announced its intent to separate its Food Processing business through a spin-off of the Food Processing business, under which the stock of Food Processing, as a new independent publicly traded company, will be distributed to Middleby’s shareholders. As of the date hereof, Middleby is targeting completion of the separation by early 2026, subject to certain customary conditions, including, among others, final approval by the company’s Board of Directors and the effectiveness of appropriate filings with the SEC. The spin-off of Food Processing is expected to be tax-free for U.S. federal income tax purposes. There can be no assurance that any separation transaction will ultimately occur or, if one does occur, of its terms or timing. 86 THE MIDDLEBY CORPORATION SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE FISCAL YEARS ENDED DECEMBER 28, 2024, DECEMBER 30, 2023 AND DECEMBER 31, 2022 (amounts in thousands) Balance Beginning of Period Additions/ (Recoveries) Charged to Expense Other Adjustments (1) Write-Offs During the Period Balance at End of Period Allowance for doubtful accounts; deducted from accounts receivable on the balance sheets- 2024 $ 23,464 $ 4,559 $ 5 $ ( 3,431 ) $ 24,597 2023 $ 20,295 $ 5,886 $ 973 $ ( 3,690 ) $ 23,464 2022 $ 18,770 $ 4,311 $ 776 $ ( 3,562 ) $ 20,295 (1) Amounts consist primarily of valuation allowances assumed from acquired companies. Balance Beginning of Period Additions/ (Recoveries) Charged to Expense Write-Offs During the Period Balance at End of Period Valuation allowance - Deferred tax assets 2024 $ 15,749 $ ( 1,695 ) $ — $ 14,054 2023 $ 11,599 $ 4,150 $ — $ 15,749 2022 $ 10,222 $ 1,377 $ — $ 11,599 87 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None