What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2026-03-04 compared with 2025-02-26 · 196 added, 197 removed, 203 unchanged (66% of the section changed)

10 unchanged sentences

• dependence on key customers;

• risks associated with the company's foreign operations, including market acceptance and demand for the company's products and the company's ability to manage the risk associated with the exposure to foreign currency exchange rate fluctuations;

• the company's ability to protect its trademarks, copyrights and other intellectual property;

1 unchanged sentence

• the impact of announced management and organizational changes;

• the state of the residential construction, housing and home improvement markets;

• the state of the credit markets, including mortgages, home equity loans and consumer credit;

• the state of the credit markets and consumer credit;

Table of Cont ents

• intense competition in the company's business segments including the impact of both new and established global competitors;

6 unchanged sentences

Risk Factors" of this filing and discussion of risks included in the company's SEC filings.

Discontinued Operations

On December 4, 2025, the company entered into a partnership interest purchase agreement to sell a 51% stake in its Residential Kitchen Equipment Group to an affiliate of 26North Partners LP in a transaction valuing the business at $885 million (the “Residential Transaction”).

The Residential Transaction was completed on February 2, 2026.

Following the close of the Residential Transaction, the company owns a 49% non-controlling interest in a new standalone joint venture holding the business.

The company received net cash proceeds of approximately $565 million and a $135 million promissory note from the joint venture, subject to future closing adjustments.

The results of the Residential Kitchen Equipment Group are presented as discontinued operations in the company’s Consolidated Financial Statements.

The Residential Kitchen Equipment Group was historically presented as a reportable segment.

See Notes 1 and 12 to the Consolidated Financial Statements for further details.

Proposed Separation Transaction

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.

As of the date hereof, Middleby is targeting completion of the separation in the second quarter of 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.

2 unchanged sentences

Current Events

Inflation and Interest Rate Environment

The company has been negatively impacted by inflation in wages, logistics, energy, raw materials and component costs.

The current domestic and international political environment has contributed to uncertainty surrounding the future state of the global economy.

Recent significant trade policy and tariff actions by the U.S.

government and many other countries 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, and while the company is actively exploring opportunities to mitigate these increased costs, there can be no assurance of the company’s ability to offset the impact of these tariffs fully.

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 financial statements in any particular reporting period.

Even in light of such headwinds, we remain focused on delivering strong financial results and executing on our long-term strategy and profitability objectives, as well as continuing to identify operational efficiencies in all aspects of our business.

In addition to tariffs, the company has been negatively impacted by inflation in wages, logistics, energy, raw materials and component costs.

Price increases and pricing strategies have been implemented to mitigate the impact of cost inflation on margins and the company continues to actively monitor costs.

High inflation and uncertainty surrounding the Federal Reserve's interest rate policy decisions let to increased interest rates in 2023 and into the first quarter of 2024, which combined with global macroeconomic uncertainty, has and may continue to impact customer demand.

Even in light of such headwinds, we remain focused on delivering strong financial results and executing on our long-term strategy and profitability objectives.

Supply Chain, Labor and Logistics Constraints

Recently announced interest rate cuts are expected to reduce demand headwinds in the long term;

however consumer demand in the near term has and may continue to be impacted by higher inflation levels and uncertainty surrounding the Federal Reserve’s future interest rate policy decisions.

The company continues to actively monitor global supply chain, labor and logistics constraints, which have had a negative impact on the company's ability to source parts and complete and ship units.

While the company is seeing improvement on certain supply chain and logistics constraints, supply chains for certain key components remain distressed.

The decreased availability of resources and inflationary costs resulted in heightened inventory levels for certain components above current demand levels.

To combat these pressures, the company has evaluated alternative sourcing, dual sourcing and collaborated across the organization, where appropriate, without materially presenting new risks or increasing current risks around quality and reliability.

While the company is seeing improvement on certain supply chain and logistics constraints, supply chains for certain key components remain distressed and uncertain given trade policy and tariff actions.

The decreased availability of resources and inflationary costs have resulted in heightened inventory levels.

Table of Cont ents

and reliability.

Our capital resources have been and the company expects they will continue to be sufficient to address these challenges.

NET SALES SUMMARY

(dollars in thousands)

Net Sales Summary (dollars in thousands)

Fiscal Year Ended (1)

4 unchanged sentences

Food Processing $ 850,155 26.6 $ 769,855 24.4 $ 756,773 23.3

Residential Kitchen $ 724,923 18.7 $ 794,516 19.7 $ 1,048,122 26.0

Total $ 3,201,202 100.0 % $ 3,150,239 100.0 % $ 3,242,090 100.0 %

10 unchanged sentences

Impairments 0.3 0.3 0.1

Income from operations 16.9 15.7 15.9

Income from continuing operations 18.0 20.5 20.1

Interest expense and deferred financing amortization, net 2.9 3.0 3.7

1 unchanged sentence

Other expense, net 0.2 — 0.1

Earnings before income taxes 14.9 12.8 14.0

Earnings from continuing operations before income taxes 15.1 18.0 16.6

Provision for income taxes 3.6 4.6 3.8

Net earnings 11.1 % 9.9 % 10.8 %

Net earnings from continuing operations 11.5 13.4 12.8

(Loss)/earnings from discontinued operations, net of tax (20.1) 0.2 (0.4)

Net (loss)/earnings (8.6) % 13.6 % 12.4 %

(1) The company's fiscal year ends on the Saturday nearest to December 31.

Fiscal Year Ended January 3, 2026 as Compared to December 28, 2024

Net sales in fiscal 2025 increased by $51.0 million, or 1.6%, to $3,201.2 million as compared to $3,150.2 million in fiscal 2024.

Net sales increased by $107.3 million, or 3.4%, from the fiscal 2024 acquisitions of GBT GmbH Bakery, MaxMac, Emery Thompson, JC Ford, and Gorreri and the fiscal 2025 acquisitions of Frigomeccanica and Oka.

Excluding acquisitions, net sales decreased $56.3 million, or 1.8%, from fiscal 2024.

The impact of foreign exchange rates on foreign sales translated into U.S.

Dollars in fiscal 2025 increased net sales by approximately $18.7 million.

Excluding the impact of foreign exchange and acquisitions, sales decreased 2.4% for the year, including a net sales decrease of 1.7% at the Commercial Foodservice Equipment Group and a net sales decrease of 4.5% at the Food Processing Equipment Group.

• Net sales of the Commercial Foodservice Equipment Group decreased by $29.4 million, or 1.2%, to $2,351.0 million in fiscal 2025, as compared to $2,380.4 million in fiscal 2024.

Excluding the impact of the acquisition, net sales of the Commercial Foodservice Equipment Group decreased $35.7 million, or 1.5%, as compared to fiscal 2024.

Excluding the impact of foreign exchange and the acquisition, net sales decreased $40.5 million, or 1.7%, at the Commercial Foodservice Equipment Group.

Domestically, the company realized a sales decrease of $24.0 million, or 1.4%, to $1,681.9 million, as compared to $1,705.9 million in fiscal 2024.

Excluding the acquisition, the net decrease in

Table of Cont ents

domestic sales was $30.1 million, or 1.8%.

The decrease in domestic sales is related to slower market conditions particularly with lower chain customer store traffic and replacement demands.

International sales decreased $5.4 million, or 0.8%, to $669.1 million, as compared to $674.5 million in the prior year.

Excluding the impact of foreign exchange and the acquisition, the net sales decrease in international sales was $10.4 million, or 1.5%.

The decrease in international sales is related to slow market conditions, primarily in the Latin American markets.

• Net sales of the Food Processing Equipment Group increased by $80.4 million, or 10.4%, to $850.2 million in fiscal 2025, as compared to $769.8 million in fiscal 2024.

Net sales from the acquisitions of GBT GmbH Bakery, MaxMac, JC Ford, Gorreri, Frigomeccanica, and Oka accounted for an increase of $101.0 million during fiscal 2025.

Excluding the impact of acquisitions, net sales of the Food Processing Equipment Group decreased $20.6 million, or 2.7%, as compared to fiscal 2024.

Excluding the impact of foreign exchange and acquisitions, net sales decreased $34.5 million, or 4.5%, at the Food Processing Equipment Group.

Domestically, the company realized a sales increase of $30.0 million, or 6.7%, to $477.9 million, as compared to $447.9 million in fiscal 2024.

This includes an increase of $41.1 million from recent acquisitions.

Excluding acquisitions, the net decrease in domestic sales was $11.1 million, or 2.5%.

The decrease in domestic sales is driven by decreased sales volumes of protein and bakery products.

International sales increased $50.4 million, or 15.7%, to $372.3 million, as compared to $321.9 million in the prior year.

This includes an increase of $59.9 million from the recent acquisitions and an increase of $13.9 million related to the favorable impact of exchange rates.

Excluding the impact of foreign exchange and acquisitions, the net sales decrease in international sales was $23.4 million, or 7.3%.

The decrease in international sales reflects decreased sales volumes of bakery and protein products in the European markets.

Gross profit increased to $1,251.9 million in fiscal 2025 as compared to $1,251.8 million in fiscal 2024.

The impact of foreign exchange rates increased gross profit by approximately $8.2 million.

The gross margin rate was 39.1% in 2025 as compared to 39.7% in 2024, primarily related to product mix at the Food Processing Equipment Group and an adverse impact from tariffs.

• Gross profit at the Commercial Foodservice Equipment Group increased by $0.6 million, or 0.1%, to $944.1 million in fiscal 2025, as compared to $943.5 million in fiscal 2024.

Excluding the acquisition, gross profit decreased by $3.4 million related to lower sales volume.

The impact of foreign exchange rates increased gross profit by approximately $2.4 million.

The gross margin rate increased to 40.2%, as compared to 39.6% in fiscal 2024.

The gross margin rate, excluding the acquisition and the impact of foreign exchange, was 40.1%.

• Gross profit at the Food Processing Equipment Group increased by $3.5 million, or 1.1%, to $308.9 million in fiscal 2025, as compared to $305.4 million in fiscal 2024.

Gross profit from the acquisitions of GBT GmbH Bakery, MaxMac, JC Ford, Gorreri, Frigomeccanica, and Oka increased gross profit by $30.4 million.

Excluding acquisitions, gross profit decreased by $26.9 million due to lower sales volume and product mix.

The impact of foreign exchange rates increased gross profit by approximately $5.8 million.

The gross margin rate decreased to 36.3%, as compared to 39.7% in fiscal 2024 primarily related to product mix.

The gross margin rate, excluding acquisitions and the impact of foreign exchange, was 37.1%.

Selling, General and Administrative Expenses

Combined selling, general and administrative expenses increased to $663.2 million in fiscal 2025, as compared to $590.1 million in fiscal 2024.

As a percentage of net sales, selling, general, and administrative expenses were 20.7% in fiscal 2025, as compared to 18.7% in fiscal 2024.

Selling, general and administrative expenses reflect increased costs of $24.0 million associated with acquisitions, including $4.9 million of intangible amortization expense.

Selling, general and administrative expenses reflect increases in strategic transaction costs of $19.8 million, combined compensation costs and share-based compensation of $12.5 million, advertising and trade show expenses of $9.2 million, commissions of $5.9 million, travel expenses of $3.2 million and professional fees of $2.1 million.

This was partially offset by a decrease of $7.0 million related to intangible amortization expenses.

Foreign exchange rates had an unfavorable impact of $3.1 million.

Restructuring Expenses

Restructuring expenses decreased $4.9 million to $3.3 million in fiscal 2025 from $8.2 million in fiscal 2024.

Restructuring expenses in fiscal 2025 and fiscal 2024 related primarily to headcount reductions and facility consolidations within both segments.

In fiscal 2025, the company recognized non-cash impairment of $10.6 million primarily associated with certain trademarks in the Commercial Foodservice Equipment Group and Food Processing Equipment Group in conjunction with diminution of values as we assessed recent market conditions and future business plans.

In fiscal 2024, the company recognized non-cash

Table of Cont ents

impairment of $10.5 million which consisted of $5.2 million impairment of certain trademarks within the Commercial Foodservice Equipment Group and an impairment charge of $5.3 million associated with the decline in recoverable value of an equity method investment.

See Note 3(f) to the Consolidated Financial Statements for further information on the annual impairment testing.

Income from Continuing Operations

Income from continuing operations decreased $69.2 million to $574.9 million in fiscal 2025 from $644.1 million in fiscal 2024.

Income from continuing operations as a percentage of net sales amounted to 18.0% in 2025 as compared to 20.5% in 2024.

During fiscal 2025 and fiscal 2024, income from continuing operations included the impairment of intangible assets.

Excluding the impairments, the decrease in operating income was primarily related to higher selling, general and administrative expenses.

Income from continuing operations in 2025 included $123.1 million of non-cash expenses, including $43.7 million of depreciation expense, $55.3 million of intangible amortization related to acquisitions, $10.6 million of impairments and $13.5 million of stock based compensation.

This compares to $139.4 million of non-cash expenses in the prior year, including $39.8 million of depreciation expense, $57.2 million of intangible amortization related to acquisitions, $10.5 million of impairments and $31.9 million of stock based compensation costs.

Non-operating Expenses

Interest and deferred financing amortization costs were $93.8 in fiscal 2025, as compared to $93.4 million in fiscal 2024.

Net periodic pension benefit decreased $8.6 million to $6.3 million in fiscal 2025, as compared to $14.9 million in fiscal 2024, related to the increase in discount rates used to calculate interest costs and a decrease in expected return on assets.

Other expense was $5.1 million in fiscal 2025, as compared to $0.5 million in fiscal 2024 and consists mainly of foreign exchange gains and losses.

A tax provision of $115.0 million, at an effective rate of 23.8%, was recorded during fiscal 2025, as compared to $145.1 million at an effective rate of 25.6%, in fiscal 2024.

The effective tax rates in 2025 and 2024 were higher than the federal tax rate of 21% primarily due to state taxes and foreign tax rate differentials.

(Loss)/Earnings from Discontinued Operations, Net of Tax

Loss from discontinued operations, net of tax, was $645.0 million during fiscal 2025, as compared to earnings from discontinued operations, net of tax, of $7.5 million during fiscal 2024.

The fiscal 2025 loss includes impairments of $709.1 million and a loss on classification as held for sale of $62.8 million, as compared to impairments of $28.2 million during fiscal 2024.

See Note 12 to the Consolidated Financial Statements for further details.

Fiscal Year Ended December 28, 2024 as Compared to December 30, 2023

Net sales in fiscal 2024 decreased by $91.9 million, or 2.8%, to $3,150.2 million as compared to $3,242.1 million in fiscal 2023.

Net sales increased by $29.7 million, or 0.7%, from the fiscal 2023 acquisitions of Flavor Burst, Blue Sparq, Filtration Automation, Terry, and Trade-Wind and the fiscal 2024 acquisitions of GBT, MaxMac, Emery Thompson, JC Ford, and Gorreri.

Net sales increased by $27.5 million, or 0.8%, from the fiscal 2023 acquisitions of Flavor Burst, Blue Sparq, Filtration Automation and Terry and the fiscal 2024 acquisitions of GBT, MaxMac, Emery Thompson, JC Ford, and Gorreri.

Excluding acquisitions, net sales decreased $119.4 million, or 3.7%, from fiscal 2023.

The impact of foreign exchange rates on foreign sales translated into U.S.

Dollars in fiscal 2024 increased net sales by approximately $0.5 million.

Excluding the impact of foreign exchange and acquisitions, sales decreased 4.7% for the year, including a net sales decrease of 4.1% at the Commercial Foodservice Equipment Group, a net sales decrease of 1.9% at the Food Processing Equipment Group and a net sales decrease of 9.5% at the Residential Kitchen Equipment Group.

Dollars in fiscal 2024 decreased net sales by approximately $3.1 million.

Excluding the impact of foreign exchange and acquisitions, sales decreased 3.6% for the year, including a net sales decrease of 4.2% at the Commercial Foodservice Equipment Group and a net sales decrease of 1.5% at the Food Processing Equipment Group.

• Net sales of the Commercial Foodservice Equipment Group decreased by $104.9 million, or 4.2%, to $2,380.4 million in fiscal 2024, as compared to $2,485.3 million in fiscal 2023.

10 unchanged sentences

The increase in international revenues is related to improvements in market conditions, primarily in the European and Latin American markets.

Table of Cont ents

• Net sales of the Food Processing Equipment Group increased by $13.0 million, or 1.7%, to $769.8 million in fiscal 2024, as compared to $756.8 million in fiscal 2023.

10 unchanged sentences

The increase in international sales reflects growth driven primarily by increased sales volumes of bakery and protein products in the European markets.

• Net sales of the Residential Kitchen Equipment Group decreased by $69.6 million, or 8.8%, to $724.9 million in fiscal 2024, as compared to $794.5 million in fiscal 2023.

Excluding the impact of the acquisition of Trade-Wind, net sales decreased $71.8 million, or 9.0%.

Excluding the impact of foreign exchange, net sales decreased $75.4 million, or 9.5%, at the Residential Kitchen Equipment Group.

Domestically, the company realized a sales decrease of $52.2 million, or 10.2%, to $461.1 million, as compared to $513.3 million in fiscal 2023.

Excluding the acquisition, the net decrease in domestic sales was $54.4 million, or 10.6%.

International sales decreased $17.4 million, or 6.2%, to $263.8 million, as compared to $281.2 million in the prior year.

This includes an increase of $3.6 million related to the favorable impact of exchange rates.

Excluding the impact of foreign exchange and the acquisition, the net sales decrease in international sales was $21.0 million, or 7.5%.

The decrease in net sales was primarily driven by challenging market conditions domestically and in the European markets.

GROSS PROFIT .

Gross profit decreased to $1,470.4 million in fiscal 2024 as compared to $1,534.1 million in fiscal 2023, primarily driven by lower sales volumes at the Commercial Foodservice Equipment Group and Residential Kitchen Equipment Group.

The impact of foreign exchange rates increased gross profit by approximately $0.3 million.

Gross profit decreased to $1,251.8 million in fiscal 2024 as compared to $1,284.1 million in fiscal 2023, primarily driven by lower sales volumes at the Commercial Foodservice Equipment Group.

The impact of foreign exchange rates decreased gross profit by approximately $0.8 million.

The gross margin rate was 39.7% in 2024 as compared to 39.6% in 2023.

3 unchanged sentences

The impact of foreign exchange rates decreased gross profit by approximately $0.7 million.

The gross margin rate increased to 39.6%, as compared to 40.1% in fiscal 2023.

The gross margin rate decreased to 39.6%, as compared to 40.1% in fiscal 2023.

The gross margin rate, excluding acquisitions and the impact of foreign exchange, was 39.6%.

5 unchanged sentences

The gross margin rate, excluding acquisitions and the impact of foreign exchange, was 39.7%.

• Gross profit at the Residential Kitchen Equipment Group decreased by $31.4 million, or 12.6%, to $218.6 million in fiscal 2024, as compared to $250.0 million in fiscal 2023.

Excluding the impact of the acquisition, gross profit decreased by $32.5 million related to lower sales volume.

The impact of foreign exchange rates increased gross profit by approximately $1.1 million.

The gross margin rate decreased to 30.2%, as compared to 31.5% in fiscal 2023 primarily related to lower sales volume.

The gross margin rate, excluding the acquisition and impact of foreign exchange, was 30.1%.

Selling, General and Administrative Expenses

2 unchanged sentences

Selling, general and administrative expenses reflect increased costs of $7.8 million associated with acquisitions, including $1.5 million of intangible amortization expense.

Selling, general and administrative expenses decreased $31.2 million related to compensation cost including commissions, $12.3 million related to intangible amortization expense and $10.9 million in professional fees.

Selling, general and administrative expenses decreased $19.8 million related to combined compensation costs and share-based compensation, $12.5 million in professional fees, $10.3 million related to intangible amortization expense and $4.0 million in lower commissions.

Foreign exchange rates had a favorable impact of $0.5 million.

Restructuring Expenses

Restructuring expenses increased $0.1 million to $14.2 million in fiscal 2024 from $14.1 million in fiscal 2023.

Restructuring expenses in fiscal 2024 related primarily to headcount reductions and facility consolidations within all three segments.

Restructuring expenses in fiscal 2023 related primarily to headcount reductions and facility consolidations within the Residential Kitchen Equipment Group and Commercial Foodservice Equipment Group.

In fiscal 2024, the company recognized non-cash impairment of $33.4 million primarily associated with several trademarks in the Residential Kitchen Equipment Group, as well as a few in the Commercial Foodservice Group in conjunction with diminution of values as we assessed recent market conditions and future business plans.

In addition, the company recorded an impairment charge of approximately $5.2 million associated with the decline in recoverable value of an equity method investment.

In fiscal 2023, the company recognized non-cash impairment of $78.1 million primarily associated with several trademarks in the Residential Kitchen Equipment Group in conjunction with diminution of values as we assessed recent market conditions and future business plans.

Restructuring expenses decreased $3.5 million to $8.2 million in fiscal 2024 from $4.7 million in fiscal 2023.

Restructuring expenses in fiscal 2024 related primarily to headcount reductions and facility consolidations within both segments.

Restructuring expenses in fiscal 2023 related primarily to headcount reductions and facility consolidations within the Commercial Foodservice Equipment Group.

In fiscal 2024, the company recognized non-cash impairment of $5.2 million primarily associated with several trademarks in the Commercial Foodservice Group in conjunction with diminution of values as we assessed recent market conditions and future business plans.

In addition, the company recorded an impairment charge of $5.3 million associated with the decline in recoverable value of an equity method investment.

In fiscal 2023, the company recognized non-cash impairment of $2.0 million primarily associated with several trademarks in the Commercial Foodservice Group in conjunction with diminution of values as we assessed recent market conditions and future business plans.

See Note 3(f) to the Consolidated Financial Statements for further information on the annual impairment testing.

INCOME FROM OPERATIONS .

Income from operations increased $21.3 million to $656.2 million in fiscal 2024 from $634.9 million in fiscal 2023.

Operating income as a percentage of net sales amounted to 16.9% in 2024 as compared to 15.7% in 2023.

During fiscal 2024 and fiscal 2023, operating income included the impairment of intangible assets.

Table of Cont ents

Income from Continuing Operations

Income from continuing operations decreased $8.3 million to $644.1 million in fiscal 2024 from $652.4 million in fiscal 2023.

Income from continuing operations as a percentage of net sales amounted to 20.4% in 2024 as compared to 20.1% in 2023.

During fiscal 2024 and fiscal 2023, income from continuing operations included the impairment of intangible assets.

Excluding the impairments, the decrease in operating income was primarily related to lower sales volume.

Income from operations in 2024 included $194.8 million of non-cash expenses, including $55.6 million of depreciation expense, $64.4 million of intangible amortization related to acquisitions, $38.6 million of impairments and $36.2 million of stock based compensation.

This compares to $254.5 million of non-cash expenses in the prior year, including $50.4 million of

depreciation expense, $75.0 million of intangible amortization related to acquisitions, $78.1 million of impairments and $51.0 million of stock based compensation costs.

Income from continuing operations in 2024 included $139.4 million of non-cash expenses, including $39.8 million of depreciation expense, $57.2 million of intangible amortization related to acquisitions, $10.5 million of impairments and $31.9 million of stock based compensation.

This compares to $150 million of non-cash expenses in the prior year, including $36.8 million of depreciation expense, $66.0 million of intangible amortization related to acquisitions, $2.0 million of impairments and $45.2 million of stock based compensation costs.

Non-operating Expenses

Interest and deferred financing amortization costs were $93.4 million in fiscal 2024, as compared to $121.1 million in fiscal 2023, reflecting the decrease in net debt levels.

Net periodic pension benefit (other than service costs) increased $5.8 million to $14.9 million in fiscal 2024, as compared to $9.1 million in fiscal 2023, related to the decrease in discount rate used to calculate the interest cost and increase in expected return on assets as a result of the higher assets value.

Net periodic pension benefit (other than service costs) increased $5.8 million to $14.9 million in fiscal 2024, as compared to $9.0 million in fiscal 2023, related to a decrease in discount rates used to calculate interest costs and an increase in expected return on assets as a result of the higher assets value.

Other expense was $0.5 million in fiscal 2024, as compared to $4.3 million in fiscal 2023 and consists mainly of foreign exchange gains and losses.

INCOME TAXES .

A tax provision of $145.1 million, at an effective rate of 25.6%, was recorded during fiscal 2024, as compared to $123.1 million at an effective rate of 23.0%, in fiscal 2023.

The fiscal 2024 provision includes a $3.6 million net 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 tax rates in 2024 and 2023 were higher than the federal tax rate of 21% primarily due to state taxes and foreign tax rate differentials.

Fiscal Year Ended December 30, 2023 as Compared to December 31, 2022

Net sales in fiscal 2023 increased by $3.7 million, or 0.1%, to $4,036.6 million as compared to $4,032.9 million in fiscal 2022.

Net sales increased by $121.3 million, or 3.0%, from the fiscal 2022 acquisitions of Kloppenberg, Proxaut, Icetro, CP Packaging, Colussi Ermes, Escher, Marco, and the fiscal 2023 acquisitions of Flavor Burst, Blue Sparq, Filtration Automation, Terry, and Trade-Wind.

Excluding acquisitions, net sales decreased $117.6 million, or 2.9%, from the prior year.

The impact of foreign exchange rates on foreign sales translated into U.S.

Dollars for fiscal 2023 increased net sales by approximately $12.3 million.

Excluding the impact of foreign exchange and acquisitions, sales decreased 3.2% for the year, including a net sales increase of 2.7% at the Commercial Foodservice Equipment Group, a net sales increase of 10.7% at the Food Processing Equipment Group and a net sales decrease of 24.7% at the Residential Kitchen Equipment Group.

• Net sales of the Commercial Foodservice Equipment Group increased by $126.7 million, or 5.3%, to $2,521.5 million in fiscal 2023 as compared to $2,394.8 million in fiscal 2022.

Net sales from the acquisitions of Kloppenberg, Icetro, Marco, Flavor Burst, Blue Sparq, and Terry accounted for an increase of $57.8 million during fiscal 2023.

Excluding the impact of acquisitions, net sales of the Commercial Foodservice Equipment Group increased $68.9 million, or 2.9%, as compared to the prior year.

Excluding the impact of foreign exchange and acquisitions, net sales increased $65.8 million, or 2.7% at the Commercial Foodservice Equipment Group.

Domestically, the company realized a sales increase of $77.4 million, or 4.4%, to $1,828.4 million, as compared to $1,751.0 million in the prior year.

This includes an increase of $24.9 million from recent acquisitions.

Excluding acquisitions, the net increase in domestic sales was $52.5 million, or 3.0%.

The increase in domestic sales is related to higher shipments, improved product mix and pricing increases.

International sales increased $49.3 million, or 7.7%, to $693.1 million, as compared to $643.8 million in the prior year.

This includes the increase of $32.9 million from recent acquisitions and an increase of $3.1 million related to the favorable impact of exchange rates.

Excluding acquisitions and foreign exchange, the net sales increase in international sales was $13.3 million, or 2.1%.

The increase in international sales is related to improvements in market conditions, primarily in the Asia and Latin American markets.

• Net sales of the Food Processing Equipment Group increased by $130.6 million, or 22.1%, to $720.6 million in fiscal 2023, as compared to $590.0 million in fiscal 2022.

Net sales from the acquisitions of CP Packaging, Colussi Ermes, Escher, and Filtration Automation accounted for an increase of $61.5 million during fiscal 2022.

Excluding the impact of acquisitions, net sales of the Food processing Equipment Group increased $69.1 million, or 11.7%, as compared to the prior year.

Excluding the impact of foreign exchange and acquisitions, net sales increased $63.4 million, or 10.7% at the Food Processing Equipment Group.

Domestically, the company realized a sales increase of $53.1 million, or 12.5%, to $479.3 million, as compared to $426.2 million in the prior year.

This includes an increase of $23.7 million from recent acquisitions.

Excluding acquisitions, the net increase in domestic sales was $29.4 million, or 6.9%.

The increase in domestic sales reflects growth primarily driven by protein products.

International sales increased $77.5 million, or 47.3%, to $241.3 million, as compared to $163.8 million in the prior year.

This includes the increase of $37.8 million from recent acquisitions and an increase of $5.7 million related to the favorable impact of exchange rates.

Excluding acquisitions and foreign exchange, the net sales increase in international sales was $34.0 million, or 20.8%.

The increase in international sales reflects growth primarily driven by bakery products.

• Net sales of the Residential Kitchen Equipment Group decreased by $253.6 million, or 24.2%, to $794.5 million in fiscal 2023, as compared to $1,048.1 million in fiscal 2022.

Excluding the impact of the acquisition of Trade-Wind, acquired July 31, 2023, net sales decreased $255.6 million, or 24.4%, as compared to the prior year.

Excluding the impact of foreign exchange and the acquisition, net sales decreased $259.1 million, or 24.7% at the Residential Kitchen Equipment Group.

Domestically, the company realized a sales decrease of $188.6 million, or 26.9%, to $513.3 million, as compared to $701.9 million in the prior year.

Excluding the acquisition, the net decrease in domestic sales was $190.0 million, or 27.1%.

International sales decreased $65.0 million, or 18.8% to $281.2 million, as compared to $346.2 million in the prior year.

This includes an increase of $3.5 million related to the favorable impact of exchange rates.

Excluding the acquisition and foreign exchange, the net sales decrease in international sales was $69.1 million, or 20.0%.

The decrease in domestic and international sales was driven by challenging market conditions and higher inventory levels in various channels.

GROSS PROFIT .

Gross profit increased by $87.5 million to $1,534.1 million in fiscal 2023 from $1,446.6 million in fiscal 2022, primarily reflecting higher sales volumes at the Commercial Foodservice Equipment Group and Food Processing Equipment Group.

The impact of foreign exchange rates increased gross profit by $3.9 million.

The gross profit margin rate increased to 38.0% in 2023 as compared to 35.9% in 2022.

The gross margin in fiscal 2022 was negatively impacted by inventory step-up charges associated with acquisitions.

In addition, higher sales volumes and improved product mix have contributed to the expansion of the gross margin rate.

The gross margin rate in fiscal 2023 excluding acquisitions and impact of foreign exchange was 38.1%.

• Gross profit at the Commercial Foodservice Equipment Group increased by $101.2 million, or 11.1%, to $1,010.6 million in fiscal 2023 as compared to $909.4 million in fiscal 2022.

Gross profit from acquisitions increased gross profit by $20.8 million.

Excluding acquisitions, gross profit increased by $80.4 million.

The impact of foreign exchange rates increased gross profit by approximately $0.4 million.

The gross profit margin rate increased to 40.1% in fiscal 2023 as compared to 38.0% in the prior year related to higher sales volumes and improved product mix.

The gross profit margin rate in fiscal 2023 excluding acquisitions and the impact of foreign exchange was 40.2%.

• Gross profit at the Food Processing Equipment Group increased by $61.8 million, or 29.1%, to $274.4 million in fiscal 2023 as compared to $212.6 million in fiscal 2022.

Gross profit from acquisitions increased gross profit by $23.1 million.

Excluding acquisitions, gross profit increased by $38.7 million.

The impact of foreign exchange rates increased gross profit by approximately $2.3 million.

The gross profit margin rate increased to 38.1% in fiscal 2023 as compared to 36.0% in the prior year related to higher sales volumes, improved product mix and acquisition integration benefits.

The gross profit margin rate in fiscal 2023 excluding the impact of foreign exchange was 38.1%.

• Gross profit at the Residential Kitchen Equipment Group decreased by $75.8 million, or 23.3%, to $250.0 million in fiscal 2023 as compared to $325.8 million in fiscal 2022.

The impact of foreign exchange rates increased gross profit by approximately $1.2 million.

The gross margin rate increased to 31.5% in fiscal 2023 as compared to 31.1% in the prior year.

Gross profit margins in the prior year were negatively impacted by acquisitions, including $15.1 million of acquisition related inventory step-up charges.

The gross profit margin rate in fiscal 2023 excluding the acquisition and the impact of foreign exchange was 31.4%.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES .

Combined selling, general, and administrative expenses increased by $9.7 million to $806.9 million in fiscal 2023 from $797.2 million in 2022.

As a percentage of net sales, selling, general and administrative expenses amounted to 20.0% in fiscal 2023 and 19.8% in fiscal 2022.

Selling, general and administrative expenses reflect increased costs of $33.6 million associated with acquisitions, including $5.6 million of non-cash intangible amortization expense.

Selling, general and administrative expenses reflect decreases in intangible amortization expense of $16.8 million, compensation costs including commissions of $7.8 million, and professional fees of $5.4 million.

These decreases were partially offset by $8.5 million attributed to higher selling and marketing expenses.

Foreign exchange rates had an unfavorable impact of $2.2 million.

RESTRUCTURING EXPENSES.

Restructuring expenses increased $4.4 million to $14.1 million from $9.7 million in the prior year period.

In fiscal 2023, restructuring expenses related primarily to headcount reductions and facility consolidations within the Commercial Foodservice Equipment Group and Residential Kitchen Equipment Group.

During fiscal 2022, restructuring charges related primarily to non-cash restructuring valuation allowances on balances associated with activities in Russia and headcount reductions and facility consolidations within the Commercial Foodservice Equipment Group and Residential Kitchen Equipment Group.

See Note 3(f) to the Consolidated Financial Statements for further information on the annual impairment testing.

INCOME FROM OPERATIONS .

Income from operations decreased $4.7 million to $634.9 million in fiscal 2023 from $639.6 million in fiscal 2022.

Operating income as a percentage of net sales amounted to 15.7% in 2023 as compared to 15.9% in 2022.

During fiscal 2023, operating income included the impairment of intangible assets.

Excluding the impairment, the increase in operating income resulted from increased profitability driven by product mix and execution of strategic cost initiatives.

Income from operations in 2023 included $254.5 million of non-cash expenses, including $50.4 million of depreciation expense, $75.0 million of intangible amortization related to acquisitions, $78.1 million of impairments of trademarks and $51.0 million of stock based compensation.

This compares to $189.3 million of non-cash expenses in the prior year, including $44.6 million of depreciation expense, $86.3 million of intangible amortization related to acquisitions and $58.4 million of stock based compensation costs.

NON-OPERATING EXPENSES .

Non-operating expenses increased $40.2 million to $115.4 million of expense in fiscal 2023 from $75.2 million of expense in fiscal 2022.

Net interest expense and deferred financing increased $31.3 million to $120.3 million in fiscal 2023 from $89.0 million in fiscal 2022 reflecting the increase in interest rates under our current credit facility.

Net periodic pension benefit (other than service costs and curtailment) decreased $33.6 million to $9.1 million in fiscal 2023 from $42.7 million in fiscal 2022 related to the increase in discount rate used to calculate the interest cost.

Other expense was $4.2 million during fiscal 2023 as compared to other expense of $28.9 million during fiscal 2022, consisting mainly of foreign exchange losses and gains.

INCOME TAXES .

A tax provision of $118.5 million, at an effective rate of 22.8%, was recorded for fiscal 2023 as compared to $127.8 million at an effective rate of 22.7%, in fiscal 2022.

The fiscal 2023 tax provision includes a $7.0 million tax benefit for the finalization of the 2022 tax returns.

The fiscal 2022 tax provision included a deferred tax benefit of approximately $13 million associated with legal entity restructuring the company undertook to integrate and simplify the company’s business operations.

The effective rates in 2023 and 2022 were higher than the federal tax rate of 21% primarily due to state taxes and foreign tax rate differentials.

Earnings/(Loss) from Discontinued Operations, Net of Tax

Earnings from discontinued operations, net of tax, were $7.5 million during fiscal 2024, as compared to a loss from discontinued operations, net of tax, of $12.1 million during fiscal 2023.

Fiscal 2024 includes impairments of $28.2 million, as compared to impairments of $76.1 million during fiscal 2023.

See Note 12 to the Consolidated Financial Statements for further details.

Financial Condition and Liquidity

Total cash and cash equivalents increased by $442.0 million to $689.5 million at December 28, 2024 from $247.5 million at December 30, 2023.

Total debt amounted to $2.4 billion at December 28, 2024 and December 30, 2023.

Total cash and cash equivalents decreased by $416.6 million to $222.2 million at January 3, 2026 from $638.8 million at December 28, 2024.

Total debt amounted to $2.2 billion and $2.4 billion at January 3, 2026 and December 28, 2024.

At January 3, 2026, the company was in compliance with all covenants pursuant to its borrowing agreements.

The company believes that its current capital resources, including cash and cash equivalents, cash expected to be generated from operations, funds available from its current lenders and access to the credit and capital markets will be sufficient to finance its operations, debt service obligations, capital expenditures, product development and expenditures for the foreseeable future.

Operating Activities

Net cash provided by operating activities after changes in assets and liabilities amounted to $686.8 million as compared to $628.8 million in the prior year.

During fiscal 2024, working capital changes contributed to operating cash flows primarily driven by decreased inventory levels of $95.4 million, offset by an increase in prepaid expenses and other assets of $45.5 million, including impacts from the timing of payments and status of over-time revenue contracts, and a decrease in accounts payable of $21.9 million.

Net cash provided by operating activities - continuing operations after changes in assets and liabilities amounted to $564.6 million as compared to $614.5 million in the prior year.

During fiscal 2025, working capital changes contributed to operating cash flows primarily driven by an increase in accounts payable of $18.1 million, offset by an increase in accounts receivable of $14.5 million and prepaid expenses.

including impacts from the timing of payments and status of over-time revenue contracts.

In connection with the company’s acquisition activities, the company added assets and liabilities from the opening balance sheets of the acquired businesses in its Consolidated Balance Sheets and accordingly these amounts are not reflected in the net changes in working capital.

Investing Activities

During fiscal 2024, net cash used for investing activities amounted to $158.5 million.

During fiscal 2025, net cash used for investing activities - continuing operations amounted to $103.8 million.

Cash used to fund acquisitions amounted to $32.0 million.

Additionally, $70.7 million was expended, primarily for upgrades of production equipment and manufacturing facilities.

Proceeds from the sale of property, plant and equipment amounted to $2.5 million.

Financing Activities

Net cash flows used for financing activities amounted to $970.9 million in 2025.

The company’s borrowing activities during 2024 included $32.8 million of net repayments under its Credit Facility.

The company’s borrowing activities during 2025 included $1.1 billion of net proceeds under the Credit Facility, $607.3 million of net repayments under the Credit Facility and $744.5 million of payments of principal of convertible notes.

On August 19, 2025, the company and its lenders entered into

Table of Cont ents

an agreement to amend the Credit Facility which, among other things, extended the maturity date of the Credit Facility from October 21, 2026 to April 28, 2028.

Additionally, the company repurchased $723.6 million of Middleby common shares during 2025.

This was comprised of $14.0 million to repurchase 83,889 shares of Middleby common stock that were surrendered to the company for withholding taxes related to restricted stock vestings and $709.6 million used to repurchase 4,911,050 shares of its common stock under a repurchase program.

At December 28, 2024, the company was in compliance with all covenants pursuant to its borrowing agreements.

Material Cash Requirements

10 unchanged sentences

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 performance obligation is a promise in a contract to transfer a distinct good or service to the customer.

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

1 unchanged sentence

For contracts with multiple performance obligations, the contract’s 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.

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.

Within the Commercial Foodservice Equipment, 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 for equipment and services based on expected cost to manufacture the good or complete the service plus an appropriate profit margin.

The estimated standalone selling price of aftermarket parts is based on observable prices.

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.

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.

In general, the Commercial Foodservice Equipment Group recognizes 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.

Equipment that is highly customized and for which we have a contractual, enforceable right to collect payment upon customer cancellation for performance completed to date qualifies for over time revenue recognition.

With control transferring over time, revenue is recognized based on the extent of progress towards completion of the performance obligation.

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).

We generally use the cost-to-cost input method of progress for our contracts because it best depicts the transfer of control to the customer that occurs as we incur costs.

Under the cost-to-cost input method, the extent of progress towards completion is measured based on the proportion of direct labor hours incurred to date to the total estimated direct labor hours at completion of the performance obligation.

The selection

Table of Cont ents

of the method to measure progress towards completion requires judgment.

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.

Revenue generated from standard equipment, contracts without an enforceable right to payment for performance completed to date, as well as aftermarket parts, are recognized at the point in time control transfers to the customer, which is typically based on contractual shipping terms.

Contract revenues are determined by negotiated contract prices, modified by our assumptions regarding contract modifications, which are common in the performance of our contracts.

Contracts modified typically result from changes in scope, specifications, design, performance, or period of completion.

In most cases, contract modifications are for services that are not distinct, and, therefore, are accounted for as part of the existing contract.

Contract estimates are based on various assumptions to project the outcome of future events.

These assumptions are dependent upon the accuracy of a variety of estimates, including engineering progress, achievement of milestones, labor productivity, and cost estimates.

Due to uncertainties inherent in the estimation process, it is possible that actual completion costs may vary from estimates.

Contract estimates are regularly monitored and revised based on changes in circumstances.

Impacts from changes in estimates of net sales and cost of sales are recognized on a cumulative catch-up basis, which recognizes in the current period the cumulative effect of the changes based on a performance obligation’s percentage of completion.

If estimated total costs on contracts indicate a loss or reduction to the percentage of total contract revenues recognized to date, these losses or reductions are recognized in the period in which the revisions are known.

The company has not recognized material favorable or unfavorable changes in estimates related to its contracts with customers in fiscal 2025, 2024, or 2023.

Inventories are stated at the lower of cost or net realizable value using the first-in, first-out method for the majority of the company’s inventories.

The company evaluates the need to record valuation adjustments for inventory on a regular basis.

The company’s policy is to evaluate all inventories including raw material, work-in-process, finished goods, and spare parts.

The company’s policy is to evaluate all inventories including raw material, work-in-process, and finished goods.

Inventory in excess of estimated usage requirements is written down to its estimated net realizable value.

20 unchanged sentences

The reporting units at which we test goodwill for impairment are our operating segments:

These consist of the Commercial Foodservice Equipment Group, the Food Processing Equipment Group and the Residential Kitchen Equipment Group.

the Commercial Foodservice Equipment Group and the Food Processing Equipment Group.

If the fair value is less than its carrying value, an impairment loss, if any, is recorded for the difference between the implied fair value and the carrying value of goodwill.

4 unchanged sentences

The estimated fair value of each reporting unit is compared to their respective carrying values.

As a result of the financial performance indicators for the Residential Kitchen reporting unit, the company deemed it necessary to complete a quantitative analysis.

The fair value of the reporting unit exceeded its carrying value by more than 8%, thus 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.

Such assumptions are, however, inherently uncertain, and different assumptions could lead to a different assessment for the reporting unit that could result in a material impairment that would adversely affect our results of operations.

As a result of the qualitative assessment for the other two reporting units, the company determined it is more likely than not that the fair value of our reporting units are greater than the carrying amounts.

Additionally, the company validates the estimates of fair

Table of Cont ents

value under the income approach by comparing the fair value estimate using a market approach.

A market approach estimates fair value by applying cash flow multiples to the reporting unit's operating performance.

The multiples are derived from comparable publicly traded companies with similar operating and investment characteristics of the reporting units.

The company considers the implied control premium and conclude whether it is reasonable based on other recent market transactions.

Based on the qualitative assessment as of September 28, 2025, the company determined it is more likely than not that the fair value of our reporting units are greater than the carrying amounts.

In estimating the fair value of its reporting units, management relies on a number of factors, including operating results, business plans, economic projections, anticipated future cash flows, comparable transactions and other market data.

5 unchanged sentences

We estimate the fair value of these intangible assets using the relief-from-royalty method which requires assumptions related to projected revenues from our long-range plans;

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

assumed royalty rates that could be payable if we did not own the trademark or trade name;

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

1 unchanged sentence

Based on the qualitative assessment as of September 28, 2025, the company identified several trademarks and trade names with indicators of potential risk for impairment and performed quantitative assessments.

In performing the quantitative analysis on these trademark assets, significant assumptions used in our relief-from-royalty model included revenue growth rates, assumed royalty rates and the discount rate, which are discussed further below.

In performing the quantitative analysis on these trademark and trade name assets, significant assumptions used in our relief-from-royalty model included revenue growth rates, assumed royalty rates and the discount rates, which are discussed further below.

• Revenue growth rates relate to projected revenues from our long-range plans and vary from brand to brand.

Adverse changes in the operating environment or our inability to grow revenues at the forecasted rates may result in a material impairment charge.

• In determining royalty rates for the valuation of our trademarks, we considered factors that affect the assumed royalty rates that would hypothetically be paid for the use of the trademarks.

The most significant factors in determining the assumed royalty rates include the overall role and importance of the trademarks in the particular industry, the profitability of the products utilizing the trademarks, and the position of the trademarked products in the given market segment.

• In developing discount rates for the valuation of our trademarks, we used the market based weighted average cost of capital, adjusted for higher relative level of risks associated with doing business in other countries, as applicable, as well as the higher relative levels of risks associated with intangible assets.

The gross value of all trademarks tested was approximately $255.8 million, including the impaired trademarks.

As a result of the quantitative testing the company recognized $33.4 million of impairment charges primarily associated with several trademarks within the Residential Kitchen Equipment Group, as well as a few in the Commercial Foodservice Equipment Group.

For further details associated with the company's trademarks impairment testing, see Note 3(f) to the Consolidated Financial Statements.

The fair values of the other trademarks tested with no impairment per the analyses, and exceeded their carrying values by 10% or more.

• In determining royalty rates for the valuation of our trademarks and trade names, we considered factors that affect the assumed royalty rates that would hypothetically be paid for the use of the trademarks and trade names.

The most significant factors in determining the assumed royalty rates include the overall role and importance of the trademarks and trade names in the particular industry, the profitability of the products utilizing the trademarks, and the position of the trademarked products in the given market segment.

• In developing discount rates for the valuation of our trademarks and trade names, we used the market based weighted average cost of capital, adjusted for higher relative level of risks associated with doing business in other countries, as applicable, as well as the higher relative levels of risks associated with intangible assets.

The gross value of all trademarks and trade names tested was approximately $23.8 million, including the impaired trademarks.

As a result of the quantitative testing the company recognized $10.6 million of impairment charges primarily associated with certain trademarks within the Commercial Foodservice Equipment Group and Food Processing Equipment Group.

For further details associated with the company's trademark and trade name impairment testing, see Note 3(f) to the Consolidated Financial Statements.

The company believes the assumptions utilized within the quantitative analyses are reasonable and consistent with assumptions that would be used by other marketplace participants.

1 unchanged sentence

If actual results are not consistent with management's estimate and assumptions, a material impairment charge of our trademarks and trade names could occur, which could have an adverse effect on the company's financial condition and results of operations.

Convertible Debt

The company issued convertible debt with debt and equity components.

The company evaluated the different components and features of the hybrid instrument and determined whether certain elements were embedded derivative instruments which require bifurcation.

Components of convertible debt instruments that upon conversion may be settled fully in cash or partly in cash based on a net-share settlement basis are accounted for separately as long-term debt and equity when the conversion feature of the convertible bonds constitute an embedded equity instrument.

When an equity instrument is identified, proceeds from issuance are allocated between debt and equity by measuring first the liability component and then determining the equity component as a residual amount.

Prior to January 3, 2021, the liability component was measured as the fair value of a similar nonconvertible debt, which results in the recognition of a debt discount.

The debt discount amortizes to interest expense, net within the Consolidated Statements of Earnings, using the effective interest method based on the expected maturity of the debt.

The equity component is reported in additional paid-in capital within the Consolidated Statement of Changes in Stockholders' Equity and is not remeasured as long as it continues to meet the conditions for equity classification.

The company allocated transaction costs related to the issuance of convertible debt using the same proportions as the proceeds from the convertible debt.

Transaction costs attributable to the liability component are recorded as a direct deduction from the related debt liability in the Consolidated Balance Sheets and are amortized to interest expense, net within the Consolidated Statements of Earnings over the term of the convertible debt using the effective interest rate method.

Transaction costs attributable to the equity component are netted within additional paid-in capital within the Consolidated Statement of Stockholders' Equity.

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

The convertible debt is now accounted for as a single liability and therefore the company no longer recognized any amortization of debt discounts as non-cash interest expense.

For additional information regarding the company's convertible debt, see Note 5, Financing Arrangements, in the Notes to the Consolidated Financial Statements.

Pension Benefits

2 unchanged sentences

These assumptions include expected long-term rate of return on plan assets and discount rates.

The amount of unrecognized actuarial gains and losses recognized in the current year’s operations is based on amortizing the unrecognized gains or losses for each plan that exceed the larger of 10% of the projected benefit obligation or the fair value of

plan assets, also known as the corridor.

The amount of unrecognized gain or loss that exceeds the corridor is amortized over the average future service of the plan participants or the average life expectancy of inactive plan participants for plans where all or almost all of the plan participants are inactive.

The amount of unrecognized gain or loss that exceeds the corridor is amortized over the

Table of Cont ents

average future service of the plan participants or the average life expectancy of inactive plan participants for plans where all or almost all of the plan participants are inactive.

While we believe that our assumptions are appropriate, significant differences in our actual experience or significant changes in our assumptions may materially affect our pension obligations and our future expense.

17 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis