midd-20240330

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 30, 2024


☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File No. 1-9973

THE MIDDLEBY CORPORATION

(Exact name of registrant as specified in its charter)


Delaware			36-3352497
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification Number)


1400 Toastmaster Drive,	Elgin,	Illinois	60120
(Address of principal executive offices)			(Zip Code)


Registrant's telephone number, including area code:			(847)			741-3300

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “accelerated filer," "large accelerated filer," "smaller reporting company," and "emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock	MIDD	Nasdaq Global Select Market

As of May 3, 2024, there were 53,768,507 shares of the registrant's common stock outstanding.

THE MIDDLEBY CORPORATION

QUARTER ENDED MARCH 30, 2024

INDEX


DESCRIPTION		PAGE
PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (unaudited)

	CONDENSED CONSOLIDATED BALANCE SHEETS as of MARCH 30, 2024 and DECEMBER 30, 2023	1

	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME for the three months ended MARCH 30, 2024 and APRIL 1, 2023	2

	CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY for the three months ended MARCH 30, 2024 and APRIL 1, 2023	3

	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS for the three months ended MARCH 30, 2024 and APRIL 1, 2023	4

	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	5

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	29

PART II. OTHER INFORMATION

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 6.	Exhibits	31

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

THE MIDDLEBY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Data)

(Unaudited)


ASSETS	Mar 30, 2024		Dec 30, 2023
Current assets:
Cash and cash equivalents	$	341,018	$	247,496
Accounts receivable, net of reserve for doubtful accounts of $23,696 and $23,464	605,180		644,576
Inventories, net	943,679		935,867
Prepaid expenses and other	116,302		112,690
Prepaid taxes	15,744		25,230
Total current assets	2,021,923		1,965,859
Property, plant and equipment, net of accumulated depreciation of $349,673 and $339,528	508,140		510,898
Goodwill	2,473,323		2,486,310
Other intangibles, net of amortization of $589,530 and $574,079	1,669,472		1,693,076
Long-term deferred tax assets	8,033		7,945
Pension benefits assets	42,817		38,535
Other assets	206,697		204,069
Total assets	$	6,930,405	$	6,906,692

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt	$	44,543	$	44,822
Accounts payable	233,432		227,080
Accrued expenses	562,908		579,192
Total current liabilities	840,883		851,094
Long-term debt	2,370,107		2,380,373
Long-term deferred tax liability	207,806		216,143
Accrued pension benefits	11,991		12,128
Other non-current liabilities	188,379		197,065
Stockholders' equity:
Preferred stock, $0.01 par value; nonvoting; 2,000,000 shares authorized; none issued	—		—
Common stock, $0.01 par value; 64,210,323 and 63,942,340 shares issued in 2024 and 2023, respectively	148		148
Paid-in capital	493,038		479,216
Treasury stock, at cost; 10,448,781 and 10,338,922 shares in 2024 and 2023, respectively	(923,026)		(906,031)
Retained earnings	3,986,322		3,899,754
Accumulated other comprehensive loss	(245,243)		(223,198)
Total stockholders' equity	3,311,239		3,249,889
Total liabilities and stockholders' equity	$	6,930,405	$	6,906,692

See accompanying notes

THE MIDDLEBY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands, Except Per Share Data)

(Unaudited)


	Three Months Ended
		Mar 30, 2024		Apr 1, 2023
Net sales		$	926,926	$	1,007,396
Cost of sales		580,568		628,661
Gross profit		346,358		378,735
Selling, general and administrative expenses		206,048		215,407
Restructuring expenses		3,177		2,306



Income from operations		137,133		161,022
Interest expense and deferred financing amortization, net		26,274		29,462
Net periodic pension benefit (other than service costs)		(3,678)		(2,251)
Other (income) expense, net		(300)		1,896
Earnings before income taxes		114,837		131,915
Provision for income taxes		28,269		32,826
Net earnings		$	86,568	$	99,089

Net earnings per share:
Basic		$	1.61	$	1.85
Diluted		$	1.59	$	1.82
Weighted average number of shares
Basic		53,654		53,594
Dilutive common stock equivalents		740		783
Diluted		54,394		54,377
Comprehensive income		$	64,523	$	114,918

See accompanying notes

THE MIDDLEBY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(amounts in thousands)

(Unaudited)


	Common Stock		Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income/(loss)		Total Stockholders' Equity











Balance, December 30, 2023	$	148	$	479,216	$	(906,031)	$	3,899,754	$	(223,198)	$	3,249,889
Net earnings	—		—		—		86,568		—		86,568
Currency translation adjustments	—		—		—		—		(26,486)		(26,486)
Change in unrecognized pension benefit costs, net of tax of $238	—		—		—		—		1,051		1,051
Unrealized gain on interest rate swap, net of tax of $108	—		—		—		—		3,390		3,390
Stock compensation	—		13,822		—		—		—		13,822

Purchase of treasury stock	—		—		(16,995)		—		—		(16,995)
Balance, March 30, 2024	$	148	$	493,038	$	(923,026)	$	3,986,322	$	(245,243)	$	3,311,239


	Common Stock		Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income/(loss)		Total Stockholders' Equity











Balance, December 31, 2022	$	147	$	408,376	$	(831,176)	$	3,498,872	$	(278,472)	$	2,797,747
Net earnings	—		—		—		99,089		—		99,089
Currency translation adjustments	—		—		—		—		26,959		26,959
Change in unrecognized pension benefit costs, net of tax of $(76)	—		—		—		—		(2,809)		(2,809)
Unrealized loss on interest rate swap, net of tax of $(2,910)	—		—		—		—		(8,321)		(8,321)

Stock compensation	—		12,232		—		—		—		12,232
Stock issuance	—		5,173		—		—		—		5,173
Purchase of treasury stock	—		—		(67,871)		—		—		(67,871)

Balance, April 1, 2023	$	147	$	425,781	$	(899,047)	$	3,597,961	$	(262,643)	$	2,862,199

See accompanying notes

THE MIDDLEBY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)


	Three Months Ended
	Mar 30, 2024		Apr 1, 2023
Cash flows from operating activities--
Net earnings	$	86,568	$	99,089
Adjustments to reconcile net earnings to net cash provided by operating activities--
Depreciation and amortization	32,410		34,947
Non-cash share-based compensation	13,822		12,232
Deferred income taxes	(6,309)		(33)
Net periodic pension benefit (other than service costs)	(3,678)		(2,251)



Other non-cash items	691		6,918
Changes in assets and liabilities, net of acquisitions
Accounts receivable, net	36,316		(17,625)
Inventories, net	(12,965)		(30,825)
Prepaid expenses and other assets	6,182		4,555
Accounts payable	7,804		8,557
Accrued expenses and other liabilities	(19,940)		(23,562)
Net cash provided by operating activities	140,901		92,002
Cash flows from investing activities--
Net additions to property, plant and equipment	(13,743)		(25,485)

Purchase of intangible assets	(80)		(1,625)
Acquisitions, net of cash acquired	(2,266)		(9,340)
Net cash used in investing activities	(16,089)		(36,450)
Cash flows from financing activities--
Proceeds under Credit Facility	—		195,000
Repayments under Credit Facility	(10,938)		(190,875)

Net (repayments) proceeds under foreign bank loan	(570)		197


Repurchase of treasury stock	(16,995)		(67,648)

Other, net	(55)		(51)

Net cash used in financing activities	(28,558)		(63,377)
Effect of exchange rates on cash and cash equivalents	(2,732)		2,348
Changes in cash and cash equivalents--
Net increase (decrease) in cash and cash equivalents	93,522		(5,477)
Cash and cash equivalents at beginning of year	247,496		162,001
Cash and cash equivalents at end of period	$	341,018	$	156,524

Non-cash investing and financing activities:
Stock issuance related to acquisition and purchase of intangible assets	$	—	$	5,173

See accompanying notes

THE MIDDLEBY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 30, 2024

(Unaudited)

1)Summary of Significant Accounting Policies

a)Basis of Presentation

The condensed consolidated financial statements have been prepared by The Middleby Corporation (the "company" or “Middleby”), pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The financial statements are unaudited and certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the company believes that the disclosures are adequate to make the information not misleading. These financial statements should be read in conjunction with the financial statements and related notes contained in the company's 2023 Form 10-K. The company’s interim results are not necessarily indicative of future full year results for the fiscal year 2024.

In the opinion of management, the financial statements contain all adjustments, which are normal and recurring in nature, necessary to present fairly the financial position of the company as of March 30, 2024 and December 30, 2023, the results of operations for the three months ended March 30, 2024 and April 1, 2023, cash flows for the three months ended March 30, 2024 and April 1, 2023 and statement of stockholders' equity for the three months ended March 30, 2024 and April 1, 2023.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses. Significant estimates and assumptions are used for, but are not limited to, allowances for doubtful accounts, reserves for excess and obsolete inventories, long-lived and intangible assets, warranty reserves, insurance reserves, income tax reserves, non-cash share-based compensation and post-retirement obligations. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed in the notes herein.

b)Non-Cash Share-Based Compensation

The company estimates the fair value of market-based stock awards and stock options at the time of grant and recognizes compensation cost over the vesting period of the awards and options. Non-cash share-based compensation expense was $13.8 million and $12.2 million for the three months period ended March 30, 2024 and April 1, 2023, respectively.

c)Income Taxes

A tax provision of $28.3 million, at an effective rate of 24.6%, was recorded during the three months period ended March 30, 2024, as compared to a $32.8 million tax provision at an effective rate of 24.9% in the prior year period. The effective tax rate for the three months period ended March 30, 2024 is higher than the U.S. statutory tax rate of 21% primarily due to state taxes and foreign tax rate differentials.

d)Fair Value Measures

Accounting Standards Codification ("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, that are observable either directly or indirectly.

Level 3 – Unobservable inputs based the company's 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 March 30, 2024
Financial Assets:
Interest rate swaps	$	—	$	46,060	$	—	$	46,060

Financial Liabilities:

Contingent consideration	$	—	$	—	$	52,039	$	52,039
Foreign exchange derivative contracts	$	—	$	196	$	—	$	196

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 March 30, 2024 and December 30, 2023, relates to the earnout provisions recorded in conjunction with various purchase agreements.

Earn-out liabilities are classified within Level 3 in the fair value hierarchy, as the methodology used to estimate fair value includes significant unobservable inputs reflecting management’s own assumptions. The earnout provisions associated with these acquisitions are based upon performance measurements related to sales and earnings, as defined in the respective purchase agreement. 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 Condensed Consolidated Statements of Comprehensive Income.

The following table represents changes in the fair value of the contingent consideration liabilities:


	March 30, 2024
Beginning balance	$	51,538
Payments of contingent consideration	(19)

Changes in fair value	520
Ending balance	$	52,039

e) Consolidated Statements of Cash Flows

Cash paid for interest was $27.9 million and $30.5 million for the three months ended March 30, 2024 and April 1, 2023, respectively. Cash payments totaling $8.4 million and $8.0 million were made for income taxes for the three months ended March 30, 2024 and April 1, 2023, respectively.

Other non-cash items in the adjustments to reconcile net earnings to net cash provided by operating activities consists primarily of unrealized foreign exchange on non-functional currency third party debt.

f) Earnings Per Share

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

The company’s potentially dilutive securities consist of shares issuable on vesting of restricted stock grants computed using the treasury method and amounted to 3,000 and 2,000 for the three months ended March 30, 2024 and April 1, 2023, respectively. For the three months ended March 30, 2024 and April 1, 2023, the average market price of the company's common stock exceeded the exercise price of the Convertible Notes (as defined below) resulting in 737,000 and 781,000 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 12, Financing Arrangements for further details on the Convertible Notes. There were no anti-dilutive restricted stock grants excluded from common stock equivalents in any period presented.

2) Acquisitions and Purchase Accounting

The company accounts for all business combinations using the acquisition method to record a new cost basis for the assets acquired and liabilities assumed. The difference between the purchase price and the fair value of the assets acquired and liabilities assumed has been recorded as goodwill in the financial statements. The company recognizes identifiable intangible assets, primarily trade names and customer relationships, at their fair value using a discounted cash flow model. The significant assumptions used to estimate the value of the intangible assets include revenue growth rates, projected profit margins, discount rates, royalty rates, and customer attrition rates. These significant assumptions are forward-looking and could be affected by future economic and market conditions. The results of operations are reflected in the consolidated financial statements of the company from the dates of acquisition.

The company completed no material acquisitions during the three months ended March 30, 2024.

2023 Acquisitions

During 2023, the company completed various acquisitions that were not individually material. The following estimated fair values of assets acquired and liabilities assumed are based on the information that was available as of the acquisition dates for the 2023 acquisitions and are summarized as follows (in thousands):


	Preliminary Opening Balance Sheet		Preliminary Measurement Period Adjustments		Adjusted Opening Balance Sheet
Cash	$	3,102	$	—	$	3,102

Current assets	9,964		98		10,062
Property, plant and equipment	21,954		(214)		21,740
Goodwill	38,422		2,990		41,412
Other intangibles	34,337		(722)		33,615

Other assets	—		5		5

Current liabilities	(3,774)		(1,146)		(4,920)

Long-term deferred tax liability	(958)		16		(942)
Other non-current liabilities	(12,099)		(216)		(12,315)

Consideration paid at closing	$	90,948	$	811	$	91,759


Contingent consideration	14,743		216		14,959

Net assets acquired and liabilities assumed	$	105,691	$	1,027	$	106,718

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 $17.9 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 $13.6 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 $39.7 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 amount to $15.0 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 certain acquisitions completed during 2023. Certain intangible assets are preliminarily valued using historical information from the Commercial Foodservice Equipment Group, Food Processing Equipment Group and Residential Kitchen Equipment Group, and qualitative assessments of the individual businesses at acquisition date. Specifically, the company estimated the fair values of the intangible assets based on the percentage of purchase price assigned to similar intangible assets in previous acquisitions. Thus, the provisional measurements of fair values set forth above are subject to change. The company expects to complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date.

Pro Forma Financial Information

In accordance with ASC 805 Business Combinations, the following unaudited pro forma results of operations for the three months ended March 30, 2024 and April 1, 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 acquisition and the effects of adjustments made to the carrying value of certain assets (in thousands, except per share data):


	Three Months Ended
	March 30, 2024		April 1, 2023
Net sales	$	926,926	$	1,016,112
Net earnings	86,671		98,723

Net earnings per share:
Basic	$	1.62	$	1.84
Diluted	$	1.59	$	1.82

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) 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 pending litigation will have a material effect on its financial condition, results of operations or cash flows.

4) Recently Issued Accounting Standards

In November 2023, the FASB issued Accounting Standard Update ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendment requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker, as well as disclosure of the title and position of the Chief Operating Decision Maker (“CODM”). This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and the amendments in this update are required to be applied on a retrospective basis. The company is currently evaluating the impact the adoption of this guidance will have on its Consolidated Financial Statements and disclosures.

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, and also for individual jurisdictions that are greater than 5% of total income taxes paid. 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 March 2024, the SEC issued a final rule under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors. This rule will require large accelerated filers to disclose material climate-related risks that are reasonably likely to have a material impact on its business, results of operations or financial condition. Additionally, required information about climate-related risks involves the disclosure of material direct and indirect greenhouse gas emissions from operations. The new rules will also require disclosure within the notes to the financial statements of the effects of severe weather events and natural conditions and information on any climate-related targets or goals, subject to certain materiality thresholds. The final rule, if adopted, includes a phased-in compliance period which will begin phasing in with the company's annual report for the year ending December 31, 2025.

In April 2024, the SEC determined to voluntarily stay the final rules pending certain legal challenges. The company is currently evaluating the impact the adoption of this guidance will have on its Consolidated Financial Statements and disclosures.

5) Revenue Recognition

Disaggregation of Revenue

The company disaggregates its net sales by reportable operating segment and geographical location as the company believes it best depicts how the nature, timing and uncertainty of its net sales and cash flows are affected by economic factors. 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 the company's long-term contracts within the Food Processing Equipment group is recognized over time as the equipment is manufactured and assembled. The following table summarizes the company's net sales by reportable operating segment and geographical location (in thousands):

SEC Form 10-Q filed by Middleby Corporation