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Item 1A. Risk Factors

2026-03-04 compared with 2025-02-26 · 50 added, 46 removed, 258 unchanged (27% of the section changed)

6 unchanged sentences

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

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

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

Higher energy costs, fluctuating interest rates, financial market volatility, inflation, recession, global hostilities and acts of terrorism, tariffs or changes in tariff policies have and may in the future also adversely affect the company’s business and financial performance.

For example, recent significant trade policy and tariff actions by the U.S.

government and many other countries are have created significant uncertainty and potential risks for the company.

The tariffs imposed to date have increased the cost of certain raw materials and components.

There can be no assurance of the company’s ability to offset the impact of these tariffs, fully or at all.

Furthermore, the imposition of retaliatory tariffs from other countries on the company's exported products could negatively affect demand and future sales volumes.

The long-term effects of current and future tariffs and any future trade policy changes on the global economy and the industries in which the company operates remain uncertain and could have a material adverse effect on our business, results of operations or financial condition.

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

and international markets.

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The company now has and may continue to have a significant amount of indebtedness.

At December 28, 2024, the company had $2.4 billion of borrowings and $4.3 million in letters of credit outstanding.

In August 2020, the company issued $747.5 million aggregate principal amount of 1.00% Convertible Senior Notes due 2025 (the "Convertible Notes"), which bear interest semi-annually in arrears and mature on September 1, 2025, unless they are redeemed, repurchased or converted prior to such date in accordance with their terms.

Upon conversion, the company can elect to pay or deliver cash, shares of common stock or a combination of cash and shares of common stock, in respect of the remainder, if any, of the company's conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted.

Under certain circumstances, the holders of the Convertible Notes may require the company to repay all or a portion of the principal and interest outstanding under the Convertible Notes in cash prior to the maturity date, which could have an adverse effect on the company's financial results.

At January 3, 2026, the company had $2.2 billion of borrowings and $4.5 million in letters of credit outstanding.

To the extent the company requires additional capital resources, there can be no assurance that such funds will be available on favorable terms, or at all.

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• the company may be restricted in its ability to make strategic acquisitions and to pursue new business opportunities.

The company’s current credit agreement limits its ability to conduct business, which could negatively affect the company’s ability to finance future capital needs and engage in other business activities.

The covenants in the company’s existing credit agreement contain a number of significant limitations on its ability to, among other things:

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The company’s Credit Facility (as defined below) limits its ability to conduct business, which could negatively affect the company’s ability to finance future capital needs and engage in other business activities.

The covenants in the Credit Facility contain a number of significant limitations on its ability to, among other things:

• pay dividends;

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These restrictive covenants, among others, could negatively affect the company’s ability to finance its future capital needs, engage in other business activities or withstand a future downturn in the company’s business or the economy.

Under the company’s current credit agreement, the company is required to maintain certain specified financial ratios and meet financial tests, including certain ratios of secured leverage and interest coverage.

Under the Credit Facility, the company is required to maintain certain specified financial ratios and meet financial tests, including certain ratios of secured leverage and interest coverage.

The company’s ability to comply with these requirements may be affected by matters beyond its control, and, as a result, there can be no assurance that the company will be able to meet these ratios and tests.

A breach of any of these covenants would prevent the company from being able to draw under the company's revolver and would result in a default under the company’s current credit agreement.

In the event of a default under the company’s current credit agreement, the lenders could terminate their commitments and declare all amounts borrowed, together with accrued interest and other fees, to be immediately due and payable.

A breach of any of these covenants would prevent the company from being able to draw under the Credit Facility and would result in a default under the Credit Facility.

In the event of a default under the Credit Facility, the lenders could terminate their commitments and declare all amounts borrowed, together with accrued interest and other fees, to be immediately due and payable.

Borrowings under other debt instruments that contain cross-acceleration or cross-default provisions may also be accelerated and become due and payable at such time.

The company may be unable to pay these debts in these circumstances.

The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect the company's financial condition and operating results .

In the event the conditional conversion feature of the Convertible Notes is triggered, holders of the Convertible Notes will be entitled to convert their Convertible Notes at any time during specified periods at their option.

If one or more holders elect to convert their Convertible Notes, unless the company elects to satisfy the conversion obligation by delivering solely shares of its common stock (other than paying cash in lieu of delivering any fractional share), the company would be required to settle any converted principal through the payment of cash, which could adversely affect the company's liquidity.

To the extent the company satisfies the conversion obligation by delivering shares of common stock, the company would be required to deliver a significant number of shares, which would cause dilution to its existing stockholders.

In addition, even if holders do not elect to convert their Convertible Notes in such circumstances, the company could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as a current rather than long-term liability, which would result in a material reduction in net working capital.

The capped call transactions expose the company to counterparty risk and may affect the value of the company's common stock.

In connection with the Convertible Notes, the company has entered into and may in the future enter into, capped call transactions with certain financial institutions, referred to as the capped call counterparties.

The capped call transactions are expected generally to reduce or offset the potential dilution upon conversion of the Convertible Notes and/or offset any cash payments the company is required to make in excess of the principal amount of the Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap.

From time to time, the capped call counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivative transactions with respect to the company's common stock and/or purchasing or selling the company's common stock in secondary market transactions prior to the maturity of the Convertible Notes.

Any such activity could cause a decrease in the market price of the company's common stock.

In addition, the capped call counterparties are financial institutions, and the company is subject to the risk that one or more of the capped call counterparties may default or otherwise fail to perform, or may exercise certain rights to terminate, their obligations under the capped call transactions.

The company's exposure to the credit risk of the capped call counterparties is not secured by any collateral.

If a capped call counterparty becomes subject to insolvency proceedings, the company will become an unsecured creditor in those proceedings with a claim equal to the exposure at the time under such transaction.

The company's exposure will depend on many factors but, generally, the exposure will increase if the market price or the volatility of the company's common stock increases.

In addition, upon a default or other failure to perform, or a termination of obligations, by a capped call counterparty, the company may suffer more dilution than currently anticipated with respect to the company's common stock.

The company can provide no assurances as to the financial stability or viability of the capped call counterparties.

Fluctuations in interest rates could adversely affect the company's results of operations and financial position.

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

The company maintains a revolving credit facility, which, at December 28, 2024, bore interest at 1.375% above Secured Overnight Financing Rate ("SOFR") plus a spread adjustment of 0.10% per annum.

The Credit Facility, at January 3, 2026, bore interest at 1.375% above Secured Overnight Financing Rate ("SOFR") plus a spread adjustment of 0.10% per annum.

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

For additional detail related to this risk, see Part II, Item 7A, "Quantitative and Qualitative Disclosure About Market Risk."

The company has a significant amount of goodwill and indefinite life intangibles could suffer losses due to asset impairment charges.

The company’s balance sheet includes a significant amount of goodwill and indefinite life intangible assets, which represent approximately 35% and 18%, respectively, of its total assets as of December 28, 2024.

The company has a significant amount of goodwill and indefinite life intangibles, which have in the past, and could in the future, become impaired and require us to record significant impairment charges.

The company’s balance sheet includes a significant amount of goodwill and indefinite life intangible assets, which represent approximately 28% and 13%, respectively, of its total assets as of January 3, 2026.

The excess of the purchase price over the fair value of assets acquired, including identifiable intangible assets, and liabilities assumed in conjunction with acquisitions is recorded as goodwill.

In accordance with Accounting Standards Codification (“ASC”) 350 Intangibles-Goodwill and Other, the company’s long-lived assets (including goodwill and other intangibles) are reviewed for impairment annually and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

On December 4, 2025, the company entered into a definitive agreement to sell a 51% stake in its Residential Kitchen business to an affiliate of 26North Partners LP, and the transaction contemplated by such agreement was completed on February 2, 2026.

During the third quarter of 2025, the company identified an impairment indicator impacting the fair value of Residential Kitchen Equipment Group reporting unit in connection with conducting a strategic review of its business portfolio and performed an interim quantitative impairment test as of September 27, 2025.

As a result, the company recognized non-cash impairments of $709.1 million in the three month period ended September 27, 2025, primarily associated with the interim quantitative impairment tests of goodwill of the Residential Kitchen Equipment Group reporting unit and several trademarks within Residential Kitchen Equipment Group.

In assessing the recoverability of long-lived assets, the company considers changes in economic conditions and makes assumptions regarding estimated future cash flows and other factors.

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These estimates could be significantly impacted by many factors, including changes in global and local business and economic conditions, operating costs, inflation, competition, and consumer and demographic trends.

If the company’s estimates or the underlying assumptions change in the future, the company may be required to record impairment charges that, if incurred, could have a material adverse effect on the company’s reported net earnings.

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company’s estimates or the underlying assumptions change in the future, the company may be required to record impairment charges that, if incurred, could have a material adverse effect on the company’s reported net earnings.

The company's defined benefit pension plans are subject to financial market risks that could adversely affect the company's results of operations and cash flows.

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In addition, upward pressure on the cost of providing healthcare coverage to current employees and retirees may increase the company's future funding obligations and adversely affect its results of operations and cash flows.

The company faces intense competition in the commercial foodservice, food processing, and residential kitchen equipment industries and failure to successfully compete could impact the company’s results of operations and cash flows.

The company faces intense competition in the commercial foodservice and food processing equipment industries and failure to successfully compete could impact the company’s results of operations and cash flows.

The company operates in highly competitive industries.

In each of the company’s three business segments, competition is based on a variety of factors including product features and design, brand recognition, reliability, durability, technology, energy efficiency, breadth of product offerings, price, customer relationships, delivery lead-times, serviceability and after-sale service.

In each of the company’s business segments, competition is based on a variety of factors including product features and design, brand recognition, reliability, durability, technology, energy efficiency, breadth of product offerings, price, customer relationships, delivery lead-times, serviceability and after-sale service.

The company has numerous competitors in each business segment.

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Any delays could result in increased development costs or deflect resources from other projects.

The occurrence of any of these risks could cause a substantial change in the design, delay in the development, or abandonment of new

technologies and products.

The occurrence of any of these risks could cause a substantial change in the design, delay in the development, or abandonment of new technologies and products.

Consequently, there can be no assurance that the company will develop new technologies superior to the company’s current technologies or successfully bring new products to market.

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Additionally, there can be no assurance that new technologies or products, if developed, will meet the company’s current price or performance objectives, be developed on a timely basis, or prove to be as effective as products based on other technologies.

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These warranty expenses may increase in the future and may exceed the company’s warranty reserves, which, in turn, could adversely affect the company’s financial performance.

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The company’s financial performance is subject to significant fluctuations.

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• general economic conditions;

• the lengthy, unpredictable sales cycle for the commercial foodservice equipment, food processing equipment and residential kitchen equipment groups;

• the lengthy, unpredictable sales cycle for the commercial foodservice equipment and food processing equipment groups;

• the gain or loss of significant customers;

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The company may seek to expand or enhance some of its operations by forming joint ventures or alliances with various strategic partners throughout the world.

For example, on December 4, 2025, the company announced that it had entered into a definitive agreement to sell a 51% stake in its Residential Kitchen business to an affiliate of 26North Partners LP, and the transaction contemplated by such agreement was completed on February 2, 2026.

Entering into joint ventures and alliances also entails risks, including difficulties in developing and expanding the businesses of newly formed joint ventures, exercising influence over the activities of joint ventures in which the company does not have a controlling interest and potential conflicts with the company’s joint venture or alliance partners.

The company cannot assure that any joint venture or alliance entered into or that may be entered into in the future will be successful.

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An inability to identify or complete future acquisitions could adversely affect future growth.

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The proposed spin-off may not be completed on the timeline currently contemplated or at all and may not achieve the intended benefits.

As part of our previously-announced strategic review of our business portfolio as part of the Board’s efforts to maximize shareholder value, we have announced a plan to separate our Food Processing business through a spin-off into an independent publicly traded company, which is currently expected to be completed by early 2026.

Unanticipated developments could delay or prevent the proposed spin-off or cause the proposed spin-off to occur on terms or conditions that are less favorable and/or different than expected.

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Executing the proposed spin-off also requires significant time and attention from management, which could distract them from other tasks in operating our business.

Following the proposed spin-off, the combined value of the common stock of the two publicly traded companies may not be equal to or greater than what the value of our common stock would have been had the proposed spin-off not occurred.

Following the proposed spin-off, the combined value of

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the common stock of the two publicly traded companies may not be equal to or greater than what the value of our common stock would have been had the proposed spin-off not occurred.

The company’s business could suffer in the event of a work stoppage by its unionized labor force.

Because the company has a significant number of workers whose employment is subject to collective bargaining agreements and labor union representation, the company is vulnerable to possible organized work stoppages and similar actions.

Unionized employees accounted for approximately 5% of the company’s workforce as of December 28, 2024.

Unionized employees accounted for approximately 5% of the company’s workforce as of January 3, 2026.

The company has union contracts with employees at its facilities in Windsor, California;

Algona, Iowa;

Englewood, Colorado;

Elgin, Illinois;

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

Algona, Iowa;

Easton, Pennsylvania and Lodi, Wisconsin that extend or extended through February 2027, April 2026, July 2028, December 2026, May 2027 and December 2027, respectively.

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

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If the company is unable to obtain such licenses, it also may not be able to redesign the company’s products or services to avoid infringement, which could materially adversely affect the company’s business, financial condition and operating results.

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The company is subject to information technology system failures, network disruptions, cybersecurity attacks and breaches in data security, which may materially adversely affect the company’s operations, financial condition and operating results.

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Environmental laws could also become more stringent over time, imposing greater compliance costs and increasing risks and penalties associated with any violation, which could negatively affect the company’s operating results.

There can be no assurance that identification of presently unidentified environmental conditions, more vigorous enforcement by regulatory authorities or other unanticipated events will not arise in the future resulting in additional environmental liabilities, compliance costs and penalties that could be material.

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environmental liabilities, compliance costs and penalties that could be material.

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

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

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

Additionally, as discussed further in our 2023 Sustainability Report and 2024 and 2025 Sustainability Metrics Updates, accessible at www.middleby.com/sustainability, we have made commitments to reduce the environmental impact of our operations and provide sustainable solutions to our customers, including setting targets for reducing our Greenhouse Gas (“GHG”) emission and consumption of non-renewable resources.

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

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

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

While it is uncertain whether the United States will enact legislation to adopt Pillar II, numerous countries have enacted legislation, or have indicated their intent to adopt legislation, to implement

certain aspects of Pillar II effective January 1, 2024, and the remaining global minimum tax rules by January 1, 2025.

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

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

In recent years, the OECD has issued Administrative Guidance, including the most recent agreement to a side-by-side system released on January 5, 2026.

The side-by-side agreement is intended to complement the OECD’s Pillar II model rules with the addition of new safe harbors, as well as other simplification measures, that are designed to provide clarity and reduce compliance complexity for eligible multinational companies.

The Administrative Guidance generally requires further legislative or regulatory action to be effective.

These potential changes increase tax uncertainty and may impact income tax expense in future years.

The company will continue to monitor pending legislation and implementation by individual countries and evaluate the potential impact on the company's business in future periods.

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

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

What changed 10-K

Item 1A. Risk Factors